Applied Strategic Managment

Reed supermarkets: a new wave of competitors
Name:
Course:
Tutor:
Date:
Appropriate marketing strategy for Reed Supermarkets, if implemented would see the market share increase from 14% in 2010 to the targeted 16% by the year 2014. This is despite the competition posed by the dollar and limited selection stores in the food industry. Meredith Collins is therefore facing the challenge of choosing the most appropriate strategy to implement towards the goal. Reeds Supermarkets’ SWOT analysis.
Strengths
With a 14.00% retailer positioning, it is evident that Reeds Supermarkets reputation is well built upon its recognized brand name. Other stores are less ranked by the retailer, with the closest being Delfina at 9.58%. (See Exhibit 1).
Consumer perception on quality, as indexed on the exhibit, shows a consistence in the positioning at the top rank, making Reeds Supermarkets best of quality relative to the other stores. (See Exhibit 3). Limited selection stores, typically offering a relatively small inventory of private and staple products, are caped at utmost 5% which the Reeds Supermarkets excels better by offering a wide variety. Thus the consumers will prefer a one stop shopping point for all their needs
By 2011, Reeds had maintained its position in food retailers’ market share at 14%. This kind of endorsement from the customers is a proof of the heavy presence in the market, maintaining a first position.
The stores are conveniently located in areas with a promising growth of the consumer’s population. Across the market share, Reed Supermarkets customers are somewhat older and affluent that typical customers in other markets.
Weaknesses
The strongest case against the Reed Supermarkets is the perception that the customers have on pricing of their products. Customers, rank the Reed as the highest priced of all the outlets despite offering high quality products. (See Exhibit 3). This results to the customers, who are usually driven by price, to shop less and look for more friendly outlets. In fact, other reasons rather than price seem to influence less on the choice for the shop. (See Exhibit 5)
The overall market of though attracts only a small portion. Profit margins for the food retailer are quite low. Profitability is mainly dependent on high volume sales and efficiency of operations.
The “Dollar Special” campaign launched in June 2010 is a point of tension in its profit margin. Conceptually, it is meant to battle the high priced perception where it would greatly reduce the price of the same products in their shelves at a very high discount. It was hoped that this would lure the customers and win their loyalty by comparing the prices in other stores in respect to the “Dollar Special”.
Compared to its competitors, the profit margin of between the range of 1.5% and 2.5% is relatively low. Room for error correction is quite small at such low profit margins. This situation places Reed at a high risk position in the event the losses are immense.
There is no consensus on which stratagem to implement to foster a growth in the market share within the management. Collins is in constant proposals of strategies that the rest of the management does not either unanimously agree on or simply find loopholes that would render them unfeasible.
Opportunities
Reed Supermarkets chain store has numerous opportunities that would potentially grow its market share and profit margin. Most of the opportunities are however external and will not depend on the efficiency of operations in the stores.
Firstly, there is a potential growth in Columbus economy. After the 2008 to 2010 economic recession, Collins is convinced that that is the main reason behind the massive transfers of customers to lower priced shops. This would however, according to her argument, change after the economy revived. Columba’s economy is also expected to grow faster than the state’s economy. A grown economy will therefore result in the customers’ ability to purchase the same goods focusing on probably quality than price. In that case, the Reed’s will benefit from their quality services which will translate to a bigger profit margin.
Secondly, a key trend in the food industry would incline customers to seek for healthier products despite the price range. Consumers had become more health-conscious which accelerated the growth of Whole Foods, as well as the increase of health and organic units or product varieties at most supermarkets like Reed. Collaborative relationships between the supermarkets and food manufacturers earn the Reed chain of stores more trust from the health-conscious American consumers.
Thirdly, the growing trend of privately labeled merchandise; private label foods up to 17% of the total food and beverages sales, previously 14% as in 2005. Reed chain store would work towards the marketing of the products because of the higher margin potential. Banking on its reputation, the products would also not carry the low quality image that many consumers perceived. Thus, capturing a larger market in regards to the private owned merchandise.
Threats
In its business operations, Reed faces many threats that may lead unsustainability of its operations. Competition is prevalent in its 25 stores as there are other stores that are selling the same products – some at a lower price than Reed. The key competitors of Reed are the Dollar Stores, Aldi, Wal-mart, Sam’s Club and the Whole Foods market. The latter also takes credit of healthy products than any other store.
The arrival of warehouses and superstores had enticed the customers into bulk buying budget shoppers while some customers were drawn to specific sale points due to the heavily discounted merchandise and the dollar stores. The dollar stores that often offered merchandise at a price of 1$ per unit or low multiples of dollar had dominated the store market. These stores are perhaps the biggest competitor where prices are concerned. They would offer an assortment of foods at low cost – even though a limited selection of the goods. Lean cost structure which was apparent in the mixed-up feel of the haphazard stocking in the store was the main reason for the low priced commodities. Consumers though overlooked all these as long as the price favors their pockets. Surveys have also shown a high probability of low income earners having shopped at a dollar store often than any other low priced store.
Another growing category o...