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To demonstrate an understanding of the principles of strategic management To apply the concepts for strategy implementation and control to a range of business situations To evaluate relevant research and the work of the main writers in the field of business strategy and link them to practice in strategic management. Overall Comment : Mark Would students please note that achievement of the learning outcomes for this assessment is demonstrated against the assessment criteria shown below (which are not necessarily weighted equally).
All marks/grades remain indicative until hey have been considered and confirmed by the Assessment Board Assessment Criteria 2 3 4 5 External analysis is logically argued to support the strategic recommendation based on relevant theoretical frameworks. Draws on material from the case study and demonstrates an ability to synthesis ideas by incorporating individual research. Internal analysis is well supported by relevant theoretical concepts. Draws on material from the case study and demonstrates an ability to synthesis ideas by incorporating individual research. Clear conclusions and recommendations.
Selection and application of a strategic approach with analytical justification to provide a solution to the issue identified in the case study Use of full and correct Harvard references to provide academic evidence of the assignment content Presentation -a professional business document, good structure and layout. Use of headings, sub headings, illustration, example, calculation, introduction and summary Marks Available 30 25 05 10 Additional Comments from Second marker or External Examiner (if required) Awarded BUSSES STRATEGIC MANAGEMENT – ASSIGNMENT 1 Case Study: Kiwi Save Group Pl An introduction to the UK retail industry
The total sales through UK supermarkets in 2007 exceeded EYE billion. Of this total, the majority was food (approximately EYE billion); the remainder comprised sales of household goods and clothing. The total UK food sales (from supermarkets and other outlets) in 2007 amounted to EYE billion. The grocery sector underwent a number of changes during the sass. Among the most important of these was the increasing concentration of market share among the largest companies. By 2006, the four largest competitors in the sector controlled in excess of 60% of the total market by value (Table 1).
Five years previously, he same companies had controlled less than half of the total market. Table 1: Market shares of leading UK supermarket and superstore chains by value in 2006 Number of Outlets Company Market Share (%) 545 Tests 20. 3 378 Sunburst’s 18. 1 213 USDA 12. 2 500 Safely 9. 9 979 Kiwi Save 4. 5 400 Somerville 285 Marks and Spencer 3. 6 86 Win Morrison 3. 3 113 Waitress 2. 0 108 Iceland 1. 8 Food Sales Only The history and philosophy of Kiwi Save What later became the Kiwi Save Group Pl started life in 1959 in the North Wales town of Aryl.
In 1965, when the company had four stores, it changed TTS name from Value Foods Ltd to Kiwi Save. The name change was thought appropriate to reflect the philosophy of the company: to provide foods at discounted prices. “We do not compromise on quality,” the company said, “but simply achieve savings on operating costs by efficiencies and adherence to our no-nonsense trading philosophy. ” The company’s outlets grew steadily in number (see Table 2). Although pre-packaged goods remained the core of Kiwi Saves product offering, in-store franchises allowed the products offered for sale to be substantially widened.
Branded wines, beers, spirits and tobacco were detailed through such an arrangement, as were in-store franchised departments for meats and greengrocery. In this context, ‘franchise’ referred to a nominated independent supplier selling specialized products within Kiwi Save stores. It was argued that by franchising out the retailing of non-pre-packaged goods, the core Kiwi Save retailing formula could be focused upon. Some of the franchisees were eventually acquired by Kiwi Save, although they remained operationally independent despite their change in ownership.
Shops and locations Unlike some of its competitors, Kiwi Save did not develop large out-of-town apertures. Its focus from the outset was on smaller local town centre or suburban developments which the majority of its customers could reach on foot or by a short bus ride. The average size of its stores in 2005 was less than 10,000 square feet – very small in comparison to the major food multiples such as Tests, USDA and Sunburst’s. By geographic area, the overwhelming majority of Kiwi Save outlets were opened or acquired in areas of the country that had suffered De-industrialization over recent decades.
The stores were largely located in Wales, the North West, the North East and the Midlands. A number of stores ere opened in selected parts of London and the South West. There was a small presence in Scotland. Year Number of Kiwi Save stores at year end Average store size (square feet) Total sales area (million square feet) Table 2: Number of Kiwi Save outlets 2006 2005 2004 2003 2002 2001 2000 1999 861 814 768 745 661 643 7442 7282 6950 6620 6240 6050 5910 7. 3 7. 1 7. 2 6. 5 6. 1 5. 3 5. 0 Products Kiwi Saves product range comprised both branded products from the major food manufacturers and a range of the company’s own branded products.
In order to develop the market among the more cost-conscious customers, the No Frills’ own brand was launched in 2003. The ‘No Frills’ range was packaged in simple black and white and was designed to appeal to those customers to whom value for money was more important than premium features. Within a year of the launch of ‘No Frills’, sales of the 100 products in the brand accounted for 7% of total sales and was growing. Despite new product launches, Kiwi Saves total product offering was small in comparison with the larger multiples. A typical USDA or Sunburst’s store typically carried 35,000 different product lines.
In a Kiwi save store, the figure was approximately 5,000 – mainly basic and staple goods that loud be expected to have a short residence time on the shelf (thus favoring stock turnover over customer choice). The company claimed that, by stocking different quality grades of products, the customer was given the maximum choice (three ‘grades’ of instant coffee, for example), although in other areas of the product offering Kiwi Save offered only a fraction of the choice of its larger rivals. This disparity was particularly marked with fresh produce and in more exotic and premium products (of which these were very few).
The focus of the product range was firmly on ‘the fastest selling brands, varieties and sizes’. This emphasis meant that Kiwi Save made no secret of its aim to provide cost savings (and hence lower prices) by stocking a smaller range of products than its major ‘superstore’ competitors, but that the faster stock turnover would, it was hoped, result in lower stockholders costs. Technology and systems Kiwi Save was one of the earliest adopters of scanning technology and EPOSES in the retail industry. Investment in scanning began in 1998 and was designed to exploit the new (at the time) bar code information on product packaging.
In addition to speeding up the checkout process, scanning technology facilitated paid transfer of stock-flow information to decision-makers. The company described its technology as enabling the company to “manage a product range tailored to customers’ needs and to operate an efficient and cost-effective supply chain”. Specifically, EPOSES (electronic point of sale) was designed to optimize stockholders, to increase the stocking of fast-moving items and to reduce or eliminate the holding of slow moving or obsolete stock items.
Electronic links from stores back to the central warehouse meant that stockholders and ordering was informed by data from the EPOSES system. In 2005, the group-wide imputer systems were upgraded with a view to offering a number of additional advantages. In summary, the new systems were designed to “lock in a lowest operating base”. The company detailed the advantages: 1. Upgrading our point of sale equipment to facilitate electronic payment and special promotions 2. Developing new systems to fit the product range and promotions to local needs 3. Evildoing new stock and re-ordering systems to let us refill shelves daily essential to our fresh and chilled food plans 4. Extending the computerizing programmer within our distribution centers. In order to gain economies of scale in product purchasing and distribution, a new purpose-built warehousing centre was developed in central England in 2005. Located close to the MI motorway in Hollingsworth, Impressionistic, phase 1 of the warehouse facility comprised 250,000 square feet of mufti-temperature storage.
The company described the benefits of the new facility: “This centre enables us to supply chilled, frozen and dry products together, on a daily basis. We are starting to see the benefits in better availability of products on the shelves, lower stock levels, lower costs and less damage to goods through middling orders less frequently. ” Competition Over the course of the turn of the century, a number of changes occurred both in the retail sector’s external environment and in the industry itself. All of these were to challenge Kiwi Saves competitive position.
First, the major ‘big four’ multiples (Kingsbury, Tests, Safely and USDA) focused their new developments on very large new-build stores in edge-of- town or out-of-town locations where land was cheaper and large plots were more available compared to town centers or in suburbs. These larger stores with ample parking were designed to fit the lifestyles of customers who tended to hop on a weekly or monthly basis rather than day to day and whose average spend per visit was much higher than those visiting smaller stores.
The second noticeable change in the sector was the apparent reduction in purely price-based competition. The evidence suggested that consumers became more concerned about other features of stores they shopped at rather than just price. The provision of free parking, cry©chess, on-site petrol stations and a wide range of in-kind benefits (e. G. Points-based loyalty cards, etc. ) all had an influence on shopping habits. Kiwi Save found itself unable to offer most benefits of this type.