Managerial Economics Decision Making

Managerial Economics Decision Making
Name
Institution
Wegmans Food Store
One of the most common managerial decisions in an effort to gain a competitive advantage is coming up with a strategic plan that will ensure most of the market factors are aggregated. This can be achieved through setting up a business that will seem small to its competitors but give it a unique position in the competitive market that is superior than its competitors. From the managerial strategic perspective, the key to success for any business is to come up with a unique competitive advantage, which will be difficult for the competitors to duplicate while at the same time creating value for its customers. A company that manages to gain a competitive advantage despite the market challenges emerges as the leader in its market and is likely to achieve profits that are above average. This is the path taken by Wegmans.
In an industry that has been known for thin profits margins, intense competition based on market prices and high employee turnover levels, Wegmans, a chain store of 67 supermarkets in New Jersey, New York, Virginia and Pennsylvania and just owned by family, makes it quite unique. Traditional grocers have been under attack in a number of cases. Mass merchandisers like Wal-Mart considering its super-store concept, are forced to take sales, customers and the share of the market from traditional grocers. Mass merchandisers have gained control of more than one-third of this grocery market and this market share is projected to increase to more than forty percent in future. Customers are now claiming that they are bored with the monotonous shopping experiences in most of these traditional grocers. One of the recent studies has it that 80 percent of the shoppers claim that traditional grocers seem to be all alike. This situation has led to most of the chains to struggle to survive in the market while a good number have been bought by their competitors or declared bankrupt. Regardless of this alarming market situation, Wegmans, a relatively small grocery stores chain founded by brothers Walter and John in 1930, has managed not just to survive but to be at the top of the industry.
This position can be attributed to the number of cereal aisle brands in the stores as well as its clever retail strategy not forgetting the manner in which Wegmans treats its employees. This strategy can be traced back to the earliest stages in the existence of the company when the two brothers came up with a 300-seat café as their first store around Rochester, New York. The concept was unheard of in the 1930’s. When the son of the founders, Robert Wegman, took over the management of the business in 1950, he instituted a host of benefits that were friendly to the employees including full medical coverage and profit sharing. Such benefits were not popular during that time and he defended his move claiming that he is no different from his employees.
This shows that in an effort to ensure a competitive advantage, Wegmans, from the start came up with a number of natural advantages over its competitors. Small business tend to concentrate on narrower product lines, a more clearly defined bases for its customers, special connection with the employees and customers and a specified geographical market area (Blocher, et al., 2008). This strategy puts business in close contact with their target markets, equipping them with valuable knowledge on best means of serving their employees and customers wants and needs. The simplicity of the structure of such organizations gives the owner the opportunity to keep in touch with their employers on daily basis, working side by side with them.
The annual salaries for Wegmans’ full-time employees as well as the hourly wages for the part-time employees are among the highest in this industry. The higher wages have managed to discourage labor unions from establishing shops and also maintained its employee turnover. This way, Wegmans managed to keep its costs of training and hiring new workers way below the average of the industry. Its generous scale of pay and its consistent listing as among the best 100 companies to work for attract quality workers. The business prosperity is majored on the way the business treats it employees who in turn give in their best into the business. Wegmans offers scholarships for both part time and full time employees. The last two decades has witnessed the business award more than 17,500 workers with scholarship summing to approximately $54 million. The company further sends a good number of its employees to different locations across the world to locate or learn about unique and new sources of foods ranging from cheese and wine to sushi and mushrooms. The manager, Danny, has been quoted insisting that there is no need to offer 1000 cheese varieties if its employees are not in a position to explain to the customers the best and latest ways of serving them, the types of crackers to serve the cheese on and which wines are best served with them (Länsiluoto, Back and Vanharanta, 2007)
Although the approach employed by Wegmans in managing employees pushes its cost of labor to between 15 to 17 percent of its total sales in comparison to 12 percent of the average sales for supermarkets, its annual rate of turn over for full-time workers remains at 6 percent which is less than one-third the average of the industry placed at 19 percent. More than 20 percent of the employees in Wegmans have at least ten years of service and this is evident in the knowledge wealth about the products of the company enthusiastically shared with its customers. Danny insists that it is the knowledge of his employees that will meet the needs and wants of the customers in the best way possible and so the first pump of the company to prime is on its own people (Porter, 2004).
Normally, a well strategized company develops core competencies in few main areas. The core competencies form the nucleus of the competitive advantage of the company and are normally enduring over time. Customers, markets and competitors may change with time but the core competencies of the company like those employed by Wegmans are often more durable, forming the basis for everything the company does. For a company to be effective strategically, the competencies have to be difficult for its competitors to duplicate and this is what Wegmans has managed to do by investing more on its employees, an approach non of its competitors can manage to meet. The approach has provided its customers with significant perceived benefit.
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