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Global food retail industry

Exective Summary

Global food retail industry has become firmly competitive in last couple of years. In dynamic operating environment, companies need to comprehend the competitive dynamics of the global food industry means to understand changing consumer preferences. These are making continuous efforts to meet these needs in order to secure their positions on the market. Companies have the aim to construct collaborative working connections with stakeholders, the ultimate objective of building a competent food distribution system.

Wal-Mart is the world largest shop in food retail industry. The business operates retail stores in various formats. It operates more than 6, 000 stores in america and in 13 international marketplaces. Food retail industry is a highly saturated market, new entrants would face difficulty to be successive in this industry. Steady romantic relationships with suppliers are essential to Wal-Mart business. Wal-Mart is focusing on expanding its products by including challenging products as well as green products.

When analyzing the business of Wal-Mart, they actually utilize all three of the "hard S's of McKinsey's 7S construction in their chase of the goals: Strategy, Systems, Framework. As being a retail company, Wal-Mart offers a broad assortment of products to the consumers. the food items can be positioned as Wal-Mart's star products. Device, kitchen tools, furniture, digital products, music documents and software will be the cash cows of the company. Pharmaceuticals, toys, consumer electronics and health products are Wal-Mart question markings. The photography development, rings and shoe products distributed by the business are those that show low market talk about.

Wal-Mart has the most significant IT systems of any private company in the world. It includes made significant assets in supply string management. Wal-Mart Stores seeks to capture the market penetration in food that it has achieved in hard and soft line goods. The merchandise development team frequently attends industry events in European countries and key fashion capitals and vacations to places globally. Wal-Mart's diversification strategy of the 1980s was a great success in conditions of tapping and realizing new market sections. Structured from the research of the data by appling marketing and strategic models, it is suitable to advise that the product and service development strategy be employed by Wal-Mart, due to the fact these factors provide as the central factors influencing its development and improvement.

Strategy Development in the Global Food Retail Supermarket Industry

Globalization of retail is not an emerging or completely new strategy, but an up-to-date focus for most retailers. Established stores have recognized that natural progress becoming more difficult to maintain in domistic markets, growth into new marketplaces is a necessary step towards protecting future profitability. To comprehend the competitive mother nature of the global food industry methods to understand changing consumer tastes and the food industry attempts to meet these demands. The task of moving foods from owner to buyer is now increasingly complex, affecting diverse local, nationwide, and global issues.

The food retail industry consists of the total revenues produced through supermarkets, hypermarkets, cooperatives, discounters, convenience stores, 3rd party grocers, bakers, and all the retailers of food and drink. Supply chain management (SCM) is the management of materials, information, technology and cash from the fresh material company to the consumer. It is becoming highly critical. It really is now essential to a company earnings making activities as it pertains to progress, efficiency and client satisfaction. SCM is crucial to a company financial success in conditions of earnings, cost and advantage productivity. It gets the try to build collaborative working associations between distributors, retailers, manufacturers, sales and marketing brokers with the ultimate objective of building an efficient food syndication system. The most important goal of global food vendors and wholesalers is to ensure that the products they sell are safe. They act as the purchasing agent for the buyer and the ultimate hyperlink in the supply chain. The supermarket food industry constantly seeks ways to make the nation food supply safer.

Question One: ˜Globalization' in the food retail industry

Selected Company: Wal-Mart

Wal-Mart Stores (Wal-Mart) is the planet largest retailer. The business operates shops in various formats. It works more than 6, 000 stores in the US and 13 international markets including the UK, Canada, Japan, Mexico, Brazil and China. The business retails a wide range of merchandise and services at low prices. Wal-Mart manages its business under three business sections: Wal-Mart Stores, Sam's Club, and the international section. The business has more than 2, 000 retail stores far away. The operating forms change from country to country.

(WAL-MART IN INDIA)

Wal-Mart began looking into doing business in India back in 2005. In those days Indian authorities was considering checking foreign immediate investment (FDI) to vendors. In November 2006, Wal-Mart overcome out Tesco for a joint venture opportunity with Indian mobile services leader, Bharti. The reason why was because Wal-Mart was more flexible about the retail model to be advertisementopted. The business priority seemed to be an early entry, so the world's largest shop did not lose out on the Indian consumer increase. According to the agreement between the two corporate and business giants, Bharti would control the front-end of the business, while Wal-Mart would manage the supply chain, logistics and other back-end operations.

India is a ready and interesting market for Wal-Mart with its growing middle income of 250 million and an financial growth rate of almost 9%. Even though FDI laws of the country are relatively strict, government officials are not opposed to engaging foreign businesses in the Indian market. Since the announcement of the Wal-Mart/Bharti JV, one leading group has emerged to stand for the interests of the small mom-and-pop stores. This is India FDI Watch and likewise to educating the owners about Wal-Mart, they have got organised large rallies and demonstrations against Bharti, Wal-Mart, and other big-box merchants. The mom-and-pops have an advantage because they are conveniently situated on street edges or in the heart of metropolitan areas and will often have personal romantic relationships with most consumers. However, they do not carry the variety of goods that larger suppliers do.

Threat of New Entrants and Substitutes

Being that the food retail industry is a highly saturated market, new entrants would face difficulty succeeding in this industry. Actually, it is highly problematic for discount sellers to permeate other marketplaces as Wal-Mart attempted to enter Germany and South Korea. The company was unsuccessful and got to grab due to its unprofitability. Suppliers are subject to these hurdles:

  • Economies of Scale
  • Cost of Capital
  • Distribution Channels

Substitute products are products that can be used as substitutes for other products to satisfy the same necessity of consumers. Wal-Mart advantages from this idea as discounters have lower prices than department stores and consumers go for higher quality product with the lowest prices. Wal-Mart is working on providing the best customer service possible but as a high-traffic store, it is normally impossible to provide one on one service.

Bargaining Ability of Suppliers and Buyers

Stable connections with suppliers are essential to Wal-Mart business. Without timely inventory deliveries, Wal-Mart could not maintain steadily its full cabinets and would lose customers. For this reason, the company engages in contractual agreements with its suppliers. This set up is beneficial for both people, as the company makes sure it has constant usage of stores with large market talk about. This way, suppliers have a assured buyer for the materials and can arrange specific prices.

Consumers today are trying to find the best offers possible. These are waiting for discounts and sales to bulk up on products. Discount vendors like Wal-Mart are creating huge supercenter stores because they want their stores to become one-stop trip. Customers really know what they want and how far they are willing to search for that. Suppliers must maintain high inventory levels to sustain customers and their market share. Customers traveling several mls to a store want to find the products they want in stock.

Question Two: Global food retail market dynamics

The ongoing changes and inventions in global grocery stores, as well as the movements in different industries of the meals industry, constitute a complex problem with consumers, manufacturers, and global retailing and manufacturing firms. An evergrowing trend in grocery stores is the shift in progress of food sales from high-income (developed) countries to lessen income (expanding) countries. Despite the shift, per capita commercial sales show wide regional disparities worldwide, though progress in food sales in the developing countries is likely to continue. In expectation of this growing market, food businesses appear to be repositioning themselves and investing in many growing countries.

Measures of competitiveness range at the firm, industry and country level. Competitiveness is influenced by such forces as technological innovations, public companies, infrastructure support, strong organizational framework, and government insurance policies. Small food manufacturers face macroeconomic constraints much like those of large organizations, such as exchange rate fluctuations and market access barriers in foreign market segments. Retail sector issues centered on the impact of globalization on food retailing in emerging economies, and the impact of changing consumer tastes on food retailing. Although a country may transfer little food, the influences of globalization effects are shown in its food retail sector.

Wal-Mart Success Secure Strategies

A prominent pattern in the retail industry is consumers buying less and less. Until about couple of years previously, consumers depended on bank cards. They didn't hesitate to increase their already large obligations but now consumers are trying to pay down debt instead. Wal-Mart discount stores, supercenters and wholesaler golf clubs have retained their price management strategy known as "Save money & live better. This plan was put in place in year 2008 and it is aimed at young families with children and middle class consumers trying to save.

Wal-Mart is focusing on expanding its products by including wellbeing products as well as environmentally friendly products. Together with the high energy prices facing consumers and the ideas of eating healthier and natural food, Wal-Mart has stocked products that could charm to these consumers while retaining its competitive prices. The company maintains a flexible management style where it is ready to fulfill changing demands. To meet demand, the business must encourage managers to monitor high demand products and drop unpopular products that may be a waste materials of inventory space.

Another tendency is discounter development of private brands. To contend with nationwide brands, supermarkets and stores are suffering from their own brands with the cooperation of manufacturers. The products should be distributed and sold only in the stores stores.

Net Profit Margin steps how much from every dollar of sales a business actually helps to keep in earnings. A firm with high online profit margin implies so it has better control over its costs. In this category, Wal-Mart outperforms Costco, BJ's and industry, but lags behind Target.

This table shows that how much Wal-Mart has prevailed to invest into food retail facilities to be able to secure its future success in conditions of profits.

Question Three: McKinsey's 7S framework for identifying key competencies and capacities, discuss the ability of "Wal-Mart

When analyzing the business of Wal-Mart, they actually employ all three of the "hard S's in their pursuit of their goals:

Their strength in every three of the S's is probably a big reason they have been so successful.

Strategy

Wal-Mart's overall strategy is to always supply the lowest prices. On top of that, they try to have a store which gives convenience by allowing consumers to find everything they need under one roofing. This plan of convenience with low prices has influenced Wal-Mart to be the business enterprise leader that it's. Additionally, they plan to continue to increase into marketplaces not yet penetrated by major chains, plus some markets that are already saturated, such as New Great britain and California. The other two hard S's, systems and composition, support this strategy. Also, low prices everyday is among the most style and shared worth of Wal-Mart. Even the staff is completely committed to providing the cheapest possible prices. The skills of workers are also targeted at finding inefficiencies and towards lessening prices. The low cost strategy has powered Wal-Mart to do things such as call suppliers gather, do away with manufacturer associates at sales meetings, get rid of regional office buildings, etc.

Systems

Wal-Mart has in place a couple of systems that helps it achieve its strategy of low prices each day. The largest & most profitable of the systems is the info Technology system. Wal-Mart has utilized pcs, networking, and the internet to lessen inventories and waste materials, and acceleration deliveries. Wal-Mart can hook up with their suppliers and transfer them data so they know what Wal-Mart needs so when. The low inventories allow Wal-Mart to create inventory turnover rates of around 70% which is actually high. Additionally, Wal-Mart has worked with suppliers to be able to improve their efficiencies in creation which they then cross to Wal-Mart and then to the consumer. Because of Wal-Mart strategy, these reduced costs due to systems allow Wal-Mart to reduce consumer's prices. Wal-Mart has streamlined the source system so well that it would be very hard to find any inefficiency and would be hard for just about any competitor to defeat. Also, Wal-Mart has an extremely efficient human tool system set-up that has both largely held employees happy, and resisted unionization. Wal-Mart is the major private employer and has developed systems to link raises and add-ons to performance. This encourages employees to think about the company and always do their best.

Structure

Wal-Mart also utilizes a good composition that works with the systems to empower the low price strategy. Wal-Mart has prepared warehouses and integrated them with systems. On top of that, they place their warehouses strategically so any particular one warehouse can serve many stores. They have developed time schedules so that one truck can service many stores and this following a delivery the vehicle can take back came back goods to the warehouse. The supercenter design itself is a structural advantage and strategy that Wal-Mart uses. This design allows consumers to come quickly to a single Wal-Mart store to find everything they want from groceries to gifts to clothes to playthings. Wal-Mart has designed a competent management structure which allows it to get rid of the local office. This structure alone has kept Wal-Mart huge amount of money per year. When Wal-Mart places stores in strategic locations and drives traffic using convenience and then combines the sales with its systems and composition, people get a highly efficient firm that can spend less to a bare-minimum which are then approved along to the consumer. If Wal-Mart continues to dominate these three S's, it'll continue steadily to dominate the retail market.

Question Four: BCG product matrix model, discovering major products of Wal-Mart

As a retail company, Wal-Mart offers a wide array of products to the consumers. These include groceries, toys, garments for females, men and children, rings and also other hard goods; all of these product lines can be purchased at sensible and generally affordable prices.

In order to analyze the operation and performance of the determined products of the company (Wal-Mart), the Boston Consulting Group (BCG) Matrix is used. The Boston Consulting Group (BCG) Matrix is a tool developed to evaluate company sections. Specifically, the BCG Matrix is utilized to evaluate the business units' degree of market expansion and talk about.

The distribution done in this matrix was based on the 2008 income report of the company.

Stars

In above diagram, the grocery store items function can be placed as Wal-Mart's superstar product. The survey stressed that served as the most notable revenue generator of the company, contributing to 22% in the total sales. While this creates the most cash flow, it will also be looked at that product causes the most inventory cost to the company, due to the fact Wal-Mart has to derive its grocery materials to multiple suppliers or companies.

Cash cows

On the other side, the hard (kitchen appliance, kitchen tools, furniture) and very soft goods (digital products, music files, software) will be the cash cows of the business. Compared to the groceries, the supply chain for the products are less complicated. The private-label goods are considered cash cows specifically in the international sector. It is because American brands do not display the same impact or appeal to foreign buyers as with international consumers. As cash cows, it is vital that Wal-Mart uses these products to generate money that could support its other business units particularly those categorized as stars and question marks.

Question marks

Pharmaceuticals, toys, consumer electronics and health products are Wal-Mart question markings. As suggested in the earnings report, these products may generate sales but not enough to pay the level of funds required to deliver them. Multiple suppliers and costly inventory make the products the question tag type. For this reason, it is practical that Wal-Mart consider restricting the inventory of these products to save on inventory bills.

Dogs

Finally, the image development, earrings and boot products written by the business are the ones that display low market talk about as well as growth. Considering the amount of alternatives available in the market with these products, it is definitely difficult for the business to keep these product lines. As certain suppliers are focused on distributing these goods, they have significantly more business versatility than Wal-Mart, allowing them to beat sales issues.

Question Five: product life cycle and "Ansoff progress matrix

Product life cycle

Wal-Mart is committed to improving operations, decreasing costs and increasing customer service. But the key to dealer Wal-Mart's success is its capacity to operate a vehicle costs out of its resource string and manage it successfully. Many supply chain experts make reference to Wal-Mart as a supply chain-driven company that also has shops. Wal-Mart's company philosophy (˜The Wal-Mart Way') is to be at the leading edge of logistics, circulation, vehicles, and technology. Wal-Mart has the greatest IT systems of any private company on earth. The Wal-Mart business model would fail instantly without its advanced technology and offer chain. Wal-Mart has made significant assets in supply string management.

Ansoff growth matrix

Ansoff matrix allows the marketers to check out various ways to grow the business enterprise through existing products and marketplaces and new products and markets. In addition, the matrix comprises four various strategies:

  • Market Penetration

Wal-Mart Stores is designed to capture the market penetration in food that it has achieved in hard and delicate range goods. The retail large, which posts greater than a 10% market talk about in many nonfood categories, programs to rise up its food talk about through quick supercenter expansions. To achieve their market penetration goals, they have confidence in three guiding key points:

  1. Customer Value and Service
  2. Partnership with its associates
  3. Community involvement
  • Product Development

Wal-Mart product development group inspired the appearance, feel and variety of goods. The merchandise development group going by strong communicators caused the buyer for the category and different suppliers to enhance the consistency of attributes and sizes of items. The merchandise development team frequently attends industry events in Europe and key fashion capitals and vacations to places internationally. The group studies are then regularly shown to vendors, marketers and deal designers during the season. Major seasonal tendency overview conferences are organised for spring and coil and land with smaller conferences held for summer months and getaways.

  • Market Development

Wal-Mart always seek to take benefit of on its international strategy, it is employed in the direction of building new shops far away. They planned to teach activists throughout the world about Wal-Mart retail development strategies and the company impact on local retail culture. The three major strategies used by the company before to type in a country include:

  1. Building partnerships with local businesses and organizations
  2. Working with government officials
  3. Tapping into the growing middle income purchasing power
  • Diversification

Wal-Mart's diversification strategy of the 1980s was a great success in terms of tapping and knowing new market segments. Sam's team was the most successful diversification of all at the decade by implementing wholesaling principle. The first Sam's Membership launched in Apr 1983. The business, on the other hand, opened up its first Wal-Mart Supercenter in 1988. It had been essentially a total Wal-Mart discount store with a supermarket put into it. Wal-Mart diversification into new retail formats during the 1980s performed more than increase the firm expansion in the essential regions of retail. Diversification also offered the company the opportunity to take risks and experiment.

Evaluation the Effectiveness of Marketing and Strategic Models

Based from the examination of the decided on company, it is then appropriate to recommend that the merchandise and service development strategy be employed by Wal-Mart, considering that these factors serve as the central factors impacting on its development and progress. With this type of strategy, Wal-Mart can increase its sales by means of modifying or boosting its existing products and services. This strategy has been advised as it has the ability to support the company potential to reach greater markets. Wal-Mart has multiple products which will be affected by this plan. Using the BCG matrix, it is appropriate that the business starts off the development with its prime products. Through this, the business will have sufficient money to support other relevant activities in the foreseeable future. However, by means of this strategy, Wal-Mart will be able to strengthen the market position of each of its product divisions, resulting to greater hold to these specific markets.

The recommended strategy will not only fit the purpose of the company and support its future growth but has also been recommended based on the capability of the company to use it. Wal-Mart has an efficient distribution system which in turn would support this plan. The culture of the retail company also will fit the requirements of the recommendation. Specifically, the company devotes enough time and resources to develop and maintain an experienced workforce. With effective professionals and employees, the delivery of the developed goods of the company will be produced possible. Because of this, greater satisfaction from the clients will be obtained.

Reference Sources

Text Books

  • Lynch, R. (2006) Corporate Strategy, Fourth Release, Financial Times Prentice Hall.
  • Mintzberg, H. , Ahlstrand, B. and Lampel, J. (1998) Strategy Safari, Financial Times Prentice Hall
  • Johnson, G. , Scholes, K. and Whittington, R. (2005) Exploring Corporate Strategy: Text message and Situations, 7th Release, Financial Times Prentice Hall.

Online Sources

  • http://www. walmart. com/
  • http://walmartstores. com/sites/AnnualReport/2008/docs/wal_mart_annual_report_2008. pdf
  • www. economist. com
  • www. metrofoods. net/
  • www. foot. com
  • www. ers. usda. gov/Briefing/GlobalFoodMarkets/Industry
  • www. plunkettresearch. com/Industries/
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