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Problem Statement
Peter owns a chain of health food stores in the United States. His store specializes in selling organically grown produce and health food to the local niche market. The entry of a new rival into the market has reduced the market dominance previously enjoyed by Peter’s company. The rival company, an established grocery store, is offering similar organic and health products.
Relevant Facts Related to the Problem
Some of the main factors for the decline in customers and sales are:
Competition: Entry of the grocery store chain into the organic and health food market has made a cut into the customer base. The competitor is selling similar goods at a lower cost than Peter’s store. Due to the high costs of raw materials, Peter is unable to lower his prices. Another factor is that the customer base targeted by Peter’s company is limited. Lack of marketing infrastructure and visibility has a negative impact on the business. His store currently does not offer additional services for customers.
Converting Problem into Opportunity
Environmental factors can have a major impact on the performance of health food business. For Peter to be competitive and be in business, he should first determine the factors that are contributing to the problem his business is facing. Steering the company in the right direction will require Peter to identify new strategies to counter the current shortcomings in the way the business is run. Identifying new opportunities in the industry will help Peter to look at new avenues for growth in the business. Based on the findings from research of the industry, Peter can definitely convert the problem he is facing into an opportunity. Here are some solutions that will help Peter retain his existing customers and grow his business:
Competition/Competitive Analysis: Competition can sometimes be good for business. Analyzing competitor products and identifying the differences in the offerings of products can be very useful. This will allow Peter to identify new products that he can stock up that will offset any comparative shopping by his customers. These new offerings will have to be as per the current trends in the health food industry.
Supplier: Peter will need to explore the possibility of identifying new suppliers for some of the products he is selling. This will give him the bargaining power required to lower costs on his procurements. Retaining the quality and lowering the supplier price will allow Peter to sell other products in his stores. Some of these cost benefits can be passed on to the customer as discounts.
Buyers: To retain existing customers, a high-level of service will have to be provided. Advertising and brand marketing will allow Peter to target new customers. He can start additional service offerings in his store to make it more attractive to the customers. Offering discounts through preferred membership is an excellent way to increase and retain customer loyalty. He can take advantage of technological advances and make online shopping available for his customers. He can also offer home delivery services to make shopping convenient.
Substitutes: Health food is becoming a popular preference of the people due to the increase in health issues due to fast food. Peter can take advantage of this trend and market his stores to a wider and more diverse consumer population. This can potentially increase the sales and thereby the revenue. He can differentiate his brand of goods in the market and attract consumers to prefer it over his competitor’s offering.
Participating in local community programs can increase the visibility of his company in local regions.
Challenges of Realizing Opportunity
The success of the company will depend on Peter’s ability to correctly recognize the various threats and opportunities present in the industry and within his company. Aligning these against the existing strengths and weakness of the company and formulating the correct strategy of operation is very important.
Risks Associated with the Opportunity
Competitive analysis can be very uncertain and can lead to wrong decision-making which can be risky to the business. Assuming the competitors will continue to behave in the same way they have in the past is one of the common mistakes. In response to competition, businesses can take drastic steps to lower prices in addition to offering other free services. This may decrease their profit margin even though they continue to operate. Assuming how consumers will behave in the future is also a risky prediction. Consumer preferences have been known to change without warning. Skilled employees and the required infrastructure are required to successfully operate the online shopping service.
Information Required Investigating the Opportunity
For Peter to analyze the business environment and come up with a strategy, information is required. He can use any of the multitudes of reports and data provided by the government on the health food industry and the regulations associated with his as one of his source. But mainly his focus should be on attaining information about the strategy his competitor is using to capture the health food market. He can also do internal analysis to identify his company’s strengths and weakness. He can also collect information on the current status of the health food industry and what the future forecast is.
Peter can collect the above information from public reports made available. Some of them are 1) Industry surveys 2) Annual reports of specific companies 3) Market research surveys 4) reports from the Department of Commerce 5) Survey of buying power etc.
All this information is based on past performance. Although future forecasting can be done based on this information, there is no guarantee that the economy, market status or consumer preference will remain the same.
Based on all this information, Peter can come up with a strategy for his company to move forward and become successful.
Reference:
Chapter 3, 4 & 5 – Pearce & Robinson. (2005). Strategic management (9th ed.). New York: McGraw-Hill. [University of Phoenix Custom Edition e-text]
Competitive Analysis. Retrieved May 26, 2006, from www.managementhelp.org
Going Local on a Global Scale. Retrieved May 24, 2006, from www.foodfirst.org
Schwan Food Company. Retrieved May 21, 2006, from http://en.wikipedia.org