Introduction
Comprehensive business situation analysis can take many forms. Situation analysis involves the evaluation of the situation and the trends in a particular company’s market. The commonest is the analysis on the basis three C’s. According to Orcullo (2007), his particular situation analysis refers to the study of the major elements of the businesses that crucially affect the direction that any business takes.
Gotz and Mann (2006) say that customers, costs and competition traditionally form the core of the three C’s analysis. Strauss (2008) says that, nowadays business situation analysis includes collaboration, the company itself and competitive advantage that the company holds over its rivals.
According to Bohn (2009), another model that will be used to evaluate Morison’s company is the SWOT analysis.
The strengths, weaknesses, opportunities and threats that Morrisons is experiencing relative to its competitors will be analyzed to determine the situation and recommend the possible remedies and strategies it should take to avoid losing ground to other supermarket chains.
The C’s Business Situation Analysis
Customers
Like the other leading three stores, Morrisons has focused on the mid low-end segment of the population. The company has pursued a strategy focusing on offering unbeatable customer service and a favorable shopping environment. Again, it regularly competes on special offers and other promotions that aim to convince customers as savings oriented.
The strategy has had considerable success evidenced by the number of customers who visit the stores every year. For instance, the store announced that a whooping 10.8 million customers visited the store in the three months leading to November 2009. The figures were way ahead of predictions and further served as a vote of confidence in the customer service polices that is in place.
Competition
Morrisons supermarket faces competition from many other retails chains in the UK that already control a big share of the market. Waitrose, Sainsbury, ASDA and Tesco provide for the major competition for Morrisons in the UK. Apart from Waitrose, the rest are way ahead of the Morrisons in the market in terms of diversity of goods and services and regional presence.
Company
Morrison Supermarkets plc. is classified as the fourth largest super market in the United Kingdom. It is got a sizable market share in the UK that was estimated at 11.8% in 2008. Currently, it is estimated to employ more than 124, 000. However, compared to its competitors, Morrisons was the smallest in terms of the market share segment.
It is way behind market leader Tesco with a market share of 30.9%, Asda with 16.8% and Sainsbury with 16% (Li 2008). The company majorly deals with groceries and consumer goods that form the core of its revenue sources. Its revenue in the year 2010 is estimated to have hit 14, 528 million pounds. It is made a net profit of 460 million pounds in the year 2009.
SWOT Analysis
The C’s analysis above brings out many strengths and weaknesses of the Morrison’s retail chain. Similarly, it analyses the opportunities that can be exploited and the threats that are encroaching on its survival in the market (Fine 2009). Any strategy therefore that the new leader is going to carry out must address the elements identified in the SWOT analysis.
Strengths
It is apparent that Morrisons has a distinct advantage in the Northern part of the UK. Its historical ties with the place and success in courting low and mid low-end customers is one of the strengths that it boasts over its smaller rivals. The acquisition of Safeway’s retail group has only served to reinforce that advantage of consolidating Northern UK and other parts of the country.
Again, unlike its competitors who have diversified in the products they offer, Morrison is yet to diversify universally beyond groceries and non-food offers. It therefore provides an area of strength that can be exploited by the retail chain to its advantage.
The chain also has enormous strength among the upper middle class segment of the population. Morrison too has its “good quality food” tag that it has cultivated over time and which accords strength that its competitors do not have.
Morrisons has a strong balance sheet besides owning majority of its store portfolio which is estimated at 89%. Estimates put its value of property to be 7.5 billion pounds higher than its market capitalization. With only 19% as its debt equity, Morrisons comes out top in the sector.
The company therefore is stable as far as asset worth and accumulation is concerned. The above are financial strengths that the company can use to its advantage to increase business
Weaknesses
The supermarket however seems unsure which direction it should take. Failure to establish presence in the south when all other major chains did so was a case in point where the retail chain’s top management failed to make quick decisions and take risks to increase its market share in the UK.
Opportunities
Concentration on the low-end market means there still is an opportunity for the supermarket to grow its customer base in the high sections of the population. The fact that its leading competitors have larger market share and make more profits with their low-end client base is reason enough that there is still opportunity in expanding the customer base.
Though Morrisons has ventured into the southern part of the UK, there still is an opportunity to expand its operations throughout the country to make it a nationwide chain hence access a larger client pool. While Tesco for instance has 2282 stores, Morrisons has 447 stores, giving it a huge opportunity to grow its branches to effectively compete with the leading three stores.
All of Morrisons rivals have developed online shopping options for their customers. They have expanded their market reach to accommodate those that rely on the internet for shopping.
Morrison’s new CEO has acknowledged the company is looking into the possibility of developing such a system. It is an opportunity that if exploited could see is customer base grow while the market share will be increased.
Threats
The price war between Morrisons and Tesco placed Morrisons at the receiving end. A Tesco advert in 2007 sought to inform prospective customers how Tesco had over 3000 items priced cheaper than at their rival Morrison. The financial muscle and the greater market share of the competitors will always be a threat to Morison’s position and progress as a market leader in the UK.
Strategy development
Given the stiff competition among supermarkets in the UK, it is important that Morrisons develops a strategy aimed at maintaining its competitive advantage. Its strengths as identified in the SWOT analysis will be consolidated while the measure will be put in place to stem the weaknesses. The strategy has to focus on exploiting the existing opportunities to increase the revenues of the company.
Porter’s Generic Business Model
According to Porter’s generic business opportunities model, innovation, quality enhancement and cost reduction form the core of any business strategy (Rundle and Johnson 2010). Innovation aims to increase the differentiation of products and adds value to them.
Kossowski (2007) asserts that differentiation will enhance creativity that will ensure uniqueness of products giving a company’s good s and services an edge over the others. Quality enhancement on the other hand will involve concentration of particular market segments and development of highly developed products for those markets.
Provision of cost leadership involves reduction of costs while remaining competitive on pricing. Charging lower prices will ensure while maintaining an acceptable profit margin on each unit of goods sold will effectively manage costs leading to profitability.
Porter’s generic business opportunities model suits Morrisons as it seeks to increase its market share while raising its revenues. The new Chief Executive Officer needs to focus on new innovations that will bring new customers on board.
Their marketing ways have to change so as the message goes beyond the mid low-end customer base that forms its core clientele. Innovation is also critically needed if the company is to increase the variety of goods that it has offering its customers.
Pricing has been one of the fronts that the super markets have engaged each other. Morrison’s has a strong financial backing which can easily be turned to price offers to customers.
The new CEO will need to focus on specific market segments like they are doing now with a reduced margin and an intention to win the price war. A price war can easily turn against the company especially if the rivals have a considerable financial muscle like that of Tesco and the other two leading supermarkets.
Morrisons has numerous factories where its products are manufactured. Possession of these factories gives them an advantage over their competitors. In the quest to improve sales, the new management should focus on improving the quality of their goods.
This will be easier especially because they have control over the production of a majority of goods for their outlets. The leadership of the company should focus in making goods difficult to imitate by competitors and counterfeits. That way they are able to lock in any intended onslaught on their products by the competitors.
Diversification beyond food products is necessary if market leaders like Tesco are to be challenged. Considering all leading supermarkets target the low-end segment of the market and regularly engage in price competition with Morrisons, it is important the new CEO carefully reviews the strategy. Caution will need to be applied in order to ensure costs are minimized while profits are maximized.
Five forces Model
Five forces model is another strategy model that is popular with businesses (Hax 2009).This strategy model suits into Morrisons current needs and the new management can use it to improve its market share while combating the challenges that face the company.
According to Shaw-McMinn et al.(2001), the model involves analysis of the market through five fronts which touches on almost every aspect. Threat from new entrants in the market, the industry, bargaining power if suppliers, the bargaining power of buyers and the threat of substitute products constitute the five forces that shape strategy formulation in many companies.
There are likely to other new entrants in the UK market. Though they present no considerable threat, it is important that the new management of Morrisons take note of them. New entrants normally enter the market with the intention of capitalizing on the existing player mistakes. Lack of online shopping for Morrisons may be one of the weaknesses that new entrants may be targeting.
Considering they will be competing for the same clientele, it is important that Morrisons take steps to consolidate the customer base and ensure loyalty of customers. One way the new CEO can do it is through introduction of the shopper’s card that promises rewards for loyal and consistent customers.
The supermarket industry in the UK is vibrant and any innovation player is guaranteed to keep its place. The new management of Morrisons should increase industry presence through offering diverse types of goods. Morrisons has already consolidated its position on the food sector.
Its time the new management focused on other fronts that as a result will net new customers hence increase customer base. Keeping competitive advantage should also be top of the agenda. Morrisons would want to keep its superb infrastructure that greatly aides its domination of the groceries market.
All goods that Morrisons distributes are obtained from suppliers. Considering it is largely a grocery oriented chain, suppliers come in handy. Suppliers determine the quality of the goods sold by the supermarket. Good relations with suppliers are therefore critical to Morison’s survival in the market. A few years back some industry analysts in the UK felt supermarkets in the UK including Morrisons were being too tough on suppliers.
It is understandable because Morrisons has packaged itself a store that offers quality products compare with its rivals. Considering suppliers too have power and they can decide to sell their produce to other willing industry players, it is important the new management develop a relationship that is beneficial to both parties.
It will be important for the new CEO to avoid the common hostilities that normally characterize supplier-buyer relationships.
Buyers or customers are the main backbone of any business that has intentions of surviving in the market. The bargaining power of customers if not checked and carefully dealt with can easily lead to losses. Businesses have to perform a delicate balancing act where they need to make a sale and gain profit and ensure a customer is not lost or the reputation of the company is not damaged.
The financial strength that Morrisons has plus an expected jump in profits through sound management will be enough for the new management to offer promotions that can double up as bargaining events.
Substitute products offer reprieve to customers when they feel that do not experience maximum utility from the products they are interested in. It is therefore important that Morrison’s stock substitute products that will offer customers a wide variety to choose from if their original intentions are not met. That calls for diversification of the products on offer in the stores in an effort to go beyond food products as earlier said.
Conclusion
The models described above do not offer the ultimate solution to Morrisons quest of increasing its market share in the UK. It is important for the management to note that its other leading competitors have overseas operations which gives them a competitive edge over Morrisons.
The new CEO should consider taking Morrisons operations abroad in order for the company to increase its revenues and to improve its international market share.
References
Bohn, A. (2009) The SWOT Analysis. Berlin: GRIN Verlag.
Hax, C., A. (2009) The Delta Model: Reinventing Your Business Strategy. New York: Springer.
Fine, L. G. (2009) The SWOT Analysis: Using Your Strength to Overcome Weaknesses, Using Opportunities to Overcome Threats. New York: Booksurge Llc.
Kossowski, A. (2007) Strategic Management: Porter’s Model of Generic Competitive Strategies Theory and analysis. Berlin: GRIN Verlag.
Li, E. (2008) Supermarket Chains and Grocery Market in the UK. Web.
Mann, C. J. and Gotz, K. (2006) Borderless business: managing the far-flung enterprise. London: Greenhood Publishing group.
Orcullo, N. (2007) Fundamentals of Strategic Management’ 2007. Manchester: Rex Bookstore, Inc.
Rundle, S. and Johnson. N. C. (2010) Business As Mission: A Comprehensive Guide to Theory and Practice. New York: Inter-Varsity Press.
Shaw-McMinn, Peter, G. and Moss, Garry L. (2001) Eyecare business: marketing and strategy. London: Elsevier Health Sciences.
Strauss, S. (2008) The small business bible: everything you need to know to succeed in your small business. London: John Wiley and Sons.