Strategic Analysis Report for Greggs

Strategic Analysis Report for Greggs
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Strategic Analysis Report for Greggs
Executive Summary
Greggs PLC is a competitive company in the UK food industry, having created a reputable brand. The company is strong in its brand, customer service, market outreach, and product diversification. Additionally, the company has maintained top of the list position in the industry, ranking second in total valuation. However, it faces high levels of competition, both from existing and upcoming companies in the industry. A Porters Five Forces Analysis of the industry reveals moderate threats of new entrances, high threats of product substitution, and low bargaining power for customers. Also, there is high bargaining power for suppliers as well as high competition levels. Consequently, the company made an elaborate strategy in 2013 to navigate the market, whose review in 2018 revealed huge success. Based on the success, the company envisages further strategies to keep it at the top of the industry.
Table of Contents
Contents TOC \o "1-3" \h \z \u Strategic Analysis Report for Greggs PAGEREF _Toc81103838 \h 2Executive Summary PAGEREF _Toc81103839 \h 2Table of Contents PAGEREF _Toc81103840 \h 3Introduction PAGEREF _Toc81103841 \h 4Strategic Analysis PAGEREF _Toc81103842 \h 4Industry Overview and Analysis PAGEREF _Toc81103843 \h 4Industry Market Share Concentration PAGEREF _Toc81103844 \h 5Industry Determinants and Profit Drivers PAGEREF _Toc81103845 \h 5Porters Five Forces Analysis of the On-the-go-food Industry PAGEREF _Toc81103846 \h 6Internal Analysis of Greggs Corporation PAGEREF _Toc81103847 \h 8Core Competence PAGEREF _Toc81103848 \h 8Greggs SWOT Analysis PAGEREF _Toc81103849 \h 9Greggs Generic Value Chain- Appendix 3 provides for the Generic Value Chain. PAGEREF _Toc81103850 \h 11Greggs VRIO Analysis- Appendix 4 provides the VRIO analysis PAGEREF _Toc81103851 \h 11Strategic Selection PAGEREF _Toc81103852 \h 11Clear recommendations PAGEREF _Toc81103853 \h 12Framework change management PAGEREF _Toc81103854 \h 13References PAGEREF _Toc81103855 \h 14Supporting Appendices PAGEREF _Toc81103856 \h 15Appendix 1: Greggs Menu PAGEREF _Toc81103857 \h 15Appendix 2: Greggs Prices. PAGEREF _Toc81103858 \h 15Appendix 3: Greggs Generic Value Chain PAGEREF _Toc81103859 \h 15Appendix 4: VRIO Analysis PAGEREF _Toc81103860 \h 16
Introduction
Greggs PLC, a British company, founded in 1939, is a premier bakery chain. The company specializes in savory products, including sausage rolls, sandwiches, and sweet items like vanilla slices. Generally, the company deals with wheat products, enhanced into various products through complex processes to create a final identifiable product. Greggs has over 2000 stores in the UK with over nine regional bakeries, which supply the products to the stores. Their products vary in a wide range and consist of vegan, non-vegan, and seasonal products. The company has, however, sought to expand its operations in various strategies. This paper provides a strategic analysis report of the company, considering its market capitalization, SWOT analysis, and key strategies that make its goals feasible. Additionally, the paper provides recommendations for better strategies.
Strategic Analysis
Industry Overview and Analysis
Greggs PLC primarily operates in the bakery and food-on-the-go industry, where it sells savory products. The UK market, where Greggs primarily operates, is a large market with a huge capitalization. As of 2021, the industry's market capitalization was €3.9 billion, making it a sizable portion of the UK food industry (FOB, 2021). The annual growth rate of the industry was 2.1% between 2014 and 2019. However, it is an industry faced with high pressure for innovation due to changing tastes which have orchestrated diminished demands for traditional bakery products. Many consumers in this industry have choices as to the products they may consume, which makes diversity of products and innovative addition of quality to products a key aspect of penetrating the market. As a result, large players in the market have resorted to the diversification of products, whereas the smaller specialist bakeries have proliferated. Besides, players in the industry have had to counter fluctuations in input costs, primarily in wheat, whose prices keep shifting, particularly the hike in 2011 due to global supply pressure and dramatic drop in 2015 due to good harvest. These price fluctuations are key in determining the general market profitability and driving the overall product prices.
Moreover, political uncertainty from the EU referendum impacted the market, reducing consumer confidence and reducing spending on discretionary bakery products. Regional politics that drive European commodity prices and UK markets have greatly impacted the UK wheat market, which also affects profitability and product prices. On the other hand, the weakness of the pound currency has resulted in the stability of exports in the industry. However, the currency weakness and rise in wheat prices push industry operators into reduced margins and diminished growth. For example, 2019 forecasts of the industry predicted a 0.7% slump of the revenues from the previous year, largely due to the Brexit Referendum. Therefore, the bakery industry in the UK is hugely influenced by political situations in the region but nonetheless stable.
Industry Market Share Concentration
The food-on-the-go market in the UK is a medium-level concentration. The leading players in the industry by valuation are Treasury Wine Estates at $6.7 billion, Greggs PLC at $4.1 billion, and Finsbury Food Group at $163.4 million. Greggs is relatively competitive in the market, giving the company considerable power in determining market trends. Consumption is determined by various aspects of personal earnings, but generally, the consumer base includes the general public, with no specific demographics due to the variety of products offered. As such, no specific company or competitor has specific control of a particular market, but all share the general UK public as the needs may dictate. Additionally, none of the aforementioned companies have a cult-like following, although their branding is recommendable, and their reputation keeps their market capitalization and consumer base at par.
Industry Determinants and Profit Drivers
Several factors are driving the demand for food-on-the-go products. The prevalent factors include personal income, individual food on the go consumption, general attitudes towards bakery products, and demographics. Additionally, the market is highly responsive to the prices of the used materials. Particularly, the price of wheat, which is a dominant material in the production of most on-the-go-food products such as doughnuts, is vital in determining market behaviors. The impact of these price fluctuations is evident from a study of the 2011 hike in wheat prices due to pressure on global supply, while the 2015 drop is due to overproduction. The fluctuations have all impacted hugely on the general industry prices and profits. Moreover, the industry is also responsive to the political stability of the European Union, owing to the regional connection of markets.
As aforementioned, wheat is the most quantifiable and feasible material that can indicate market responses. Wheat prices are volatile, and this determines the general costs and profitability of the market. For example, 2014-2019 saw stability in the global wheat prices, with 2015 being the lowest. Consequently, the industry grew steadily with recorded profitability in the period. Politics in the European Union have also played a key role in shaping market profitability. In 2019, for example, there was uncertainty due to the Brexit polls, which reduced consumer confidence in the products. As such, the revenue projections for 2019 predicted a 0.7% drop in revenues in the next year. Therefore, market profitability is guided by various determinants of commodity prices.
Porter Five Forces Analysis of the On-the-go-food Industry
The threat of new entrants: Moderate
There is a moderate threat of entry of new players in the bakery industry. Notably, there are few barriers to the entry of new players. The industry is saturated and highly competitive, with a perfect competition structure. For new entrants, the initial investment is not huge as they can lease equipment and stores at moderate charges. Small bakeries and fast food outlets can compete with Greggs at the most basic levels as some grassroots industry players are highly innovative, which creates their demand in the industry. Despite its perfect competition structure, there are diminished prospects of new entrants succeeding in the market, and such possibilities are moderate. This is because the leading players have numerous stores and are steadily expanding their operations, in addition to their brand and capital advantages. Moreover, leading brands have leveraged their resources to exploit these moderate threats of new entrance to occupy and market niche and gaps that would otherwise allow new players in the industry. Large scales of operation for the big brands have barred new entry and have yielded huge profit due to the existent relationship with raw material suppliers, which afford the big brands resources at a relatively lower cost. Therefore, despite it being an open market, practices by the leading market players have moderated the prospects of new entries.
Threats of Substitutes: High
There is a wide range of bakery and fast food products that can easily replace Greggs's products. The leading products in Greggs are sausage rolls, pizza, and pastries. However, new players in the market have produced vegan products that compete with Greggs, such as vegan sausage rolls, which, despite Greggs launching, is a highly competitive substitute for the original Greggs sausage. Moreover, fruit products are also feasible replacements for bakery foods. Additionally, the huge focus on nutritional foods with lower calories and sugar presents a threat of replacement of Greggs products. Therefore, the threat of substituting Greggs's products is high due to the high range of related but recommendable products.
Bargaining Power of Buyers: Moderate Pressure
The bakery industry has many buyers, and a single buyer cannot dictate prices. Therefore, the company offers a wide range of products with varying buyers who form a huge collective consumer base. However, individual purchases account for small purchases, which denies individual consumers the power to change prices. However, Greggs prices its products relative to the competition; thus, the prices offered are average, and consumers are reluctant to bargain for price change.
Bargaining Power of Suppliers: High
Greggs primarily relies on the supply of wheat for its production. Therefore, the global wheat prices are key in shifting the market dynamics, which makes the suppliers crucial players in the market. Additionally, Greggs has a higher competition in terms of costs expenditure on raw materials, which gives power to suppliers higher. Despite being an avid spender in the wheat market, Greggs does not meet all standards to dictate wheat prices; thus, the suppliers have leverage. Regarding other inputs used by Greggs, the company experiences a relatively higher competition on spending, thus having little control over suppliers.
The intensity of Competition: High
The industry is perfectly competitive, and Greggs is not on the lead as per company valuations. Treasury Wine Estates, valued at $6.7 billion, is the main competitor. Greggs PLC is valued at $4.1 billion, which poses an imbalance as to competition. The leading player can expand rapidly and swiftly into any market as per their needs since they ha...