Background
Reed Supermarket is located in the large Westgate Plaza shopping center in Columbus, Ohio. Reed’s competitors are Family Dollar and Aldi, Reed’s current strategy is to offer a higher price but lower range than Aldi (Quelch & Carlson, 2011). Reed’s real competitor is Family Dollar Stores, which has a gross margin of 32.5 versus what Reed showed (Quelch, J.A, & Carlson, 2011). It is necessary to develop a strategy in which Reid will have a competitive advantage.
Recommendations
The recommendation for Reed to increase competitive advantage will be a strategy to reduce prices and concentrate the product range. For example, the sale of fresh seafood and pharmacy products does not contribute to attracting the average buyer, but incurs high costs for the chain of stores.
Basis for Recommendation
The main basis for the recommendations were given in accordance with the SWOT analysis attached to Exhibit 1. The main threat to Reed is competition and the lack of a basis for fighting it at the moment. Rival Aldi is already making big profits as it presents a much lower price. Dollar Store does not represent serious competition for Reed, but its profits can go up due to its good location.
Assumptions and Risks
Change of strategy is always a risky process, but in this case it is necessary and inevitable. Price reduction is the easiest way to secure a competitive advantage. In addition, a decrease in the assortment of the store will lead to a decrease in supply chain costs, which cannot but positively affect the overall costs of the chain.
Next Steps
The next step should be to determine the minimum threshold for price reduction in order to understand the level of risk that the company can take. Since all stores are located in the same shopping complex, it is also necessary to understand the flow of customers that contributes to visiting a particular store.
Exhibit 1
Reference
Quelch, J.A, & Carlson, C. (2011). Reed Supermarkets: A New Wave of Competitors. Harvard Business Publishing Education. (n.d.). Web.