Supermarket Industry. Essay

3191 words - 13 pages

The overall emphasis on non-price characteristics and the relativeimportance of the different characteristics in all countries providesopportunities for retail managers to differentiate their firms awayfrom pure price competition. These consumer responses have beenimportant in shaping the marketing strategies of the food retailcompanies and have allowed a range of strategies which range from anemphasis on discount prices, to pure quality and serviceconsiderations. These strategic directions are strongly supported bypromotional programmes which emphasise the characteristics of thestores rather than the products which are stocked.In Hughes (1994) information is presented which shows that foodretailing firms are ranked number one, nine and eleven in terms oftheir advertising expenditure amongst all firms, which demonstratesthe overall importance of promotional activities to these firms.These activities allow retailers to develop their own 'brands' orimages which are independent of the brands that are sold, and arelikely to be the source of control which food retailers are reputed toexert over manufacturers.Table 5Most important factor when buying food(Percentage of respondents ranking first)QualityPriceVarietyServiceConvenienceEUROPE461716 8 8Belgium68105 6 7France59186 7 7Germany39162311 8Holland46131611 7UK511713 7 9Italy481219 7 5Spain402617 7 6Greece183918 612Source: Food Marketing Institute (1992)Positioning of retail firmsIn recent years food retail firms have pursued strategies which haveprovided consumers with increasingly diversified opportunities forpurchasing food. The discussion above has shown that thesedevelopments have been made possible by the wide range and changingnature of consumer requirements. Firms have identified thepossibilities and have developed appropriate strategies to compete inthe market place.The concept of competitive strategies is clearly developed by Porter(1980) and has become an accepted approach for analysing the manner inwhich firms within an industry compete to attain market share orenhanced performance. Porter identified a number of genericstrategies such as a focus strategy, a differentiation strategy, or alow cost strategy which were argued to be the most likely to besuccessful for a particular firm. Because this theory is developed asa general approach there is no reason why the generic strategiesshould not be applied to the food retail industry.One study which attempts to do this is the study by Alexander andVeliyath (1993) where data is collected from 500 food retailing firmsin the USA. It was shown that firms possess strategic characteristicswhich could be associated with one of these approaches, but that theseare not clearly related to simple characteristics such as store sizeor retail format.A different approach is taken in an earlier study by Lewis and Thomas(1990) who used data from UK food retailers to identify strategicgroups in the sector. The theory of strategic groups is to identifygroups of...

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