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TRADER JOE’s CASE STUDY ANALYSIS Case Solution & Answer

TRADER JOE’s CASE STUDY ANALYSIS Case Solution

Introduction

The supermarket business or industry has arisen to a greater extent over the last five years, causing a reduction in the market share. Many competitive strategies are being developed and are also being currently applied in the whole industry for the industry’s growth. As the competition is fast rising and the market share is decreasing day by day; this case study is focused on Trader Joe’s. Trader Joe’s is a huge name in the supermarket industry. It is widely known for its unique products and unique strategies. The company rose to success back in 2013. Trader Joe’s competitive strategies and sustainability over time are also discussed in the case study in detail.Trader Joe’s, despite being a successful business, faced many strategic issues. These issues are the main hurdles that are hindering Trader Joe’s success. These issues are highlighted in the case study.

Value Chain Analysis

Inbound Logistics:

Traders Joe’s does not have any suppliers currently, as they prefer to directly purchase from the manufacturers, excluding all their intermediaries, which will cut their cost and enable them to sell their products at lower prices. Their relationship with these manufacturers is quite brilliant. It doesn’t charge any fee for giving space on their store shelves.

They are autonomous to procure these products according to their needs despite their acquisition by Aldi. They don’t use any kind of technology, which helps them in finding further suppliers at reasonable terms.

Operations:

They have adopted a low cost operating method. They are using lean methodologies to improve the quality and to minimize the wastage. Storing the optimal level of inventory is the factor due to which the company’s overheads are at the minimum level. They are mostly producing private labelled products at lower prices. Their employees are well trained and possess skills and are paid reasonable salaries.

Outbound Logistics:

The company has a greater number of stores around the globe, as it has expandedits stores to more than 175 locations. The stores don’t possess any technology like the check-out systems, security systems like CCTV,etc., despite which they are managing their logistics quite brilliantly. The stores’ staff is also trained. Most of their stores are around 10000 to 15000 sq. feet smaller than the average size of supermarkets. They introduced 10 to 15 new products by changing from the previous 10 to 15 to satisfy the sophisticated customer needs. Also, there is no use of modern techniques, such as: EDI (electronic data interchange).

Marketing & Sales:

The marketing & sales do not include any kind of modern-day promotional activities,such as: public relations, direct marketing, sales promotion and the use of e-commerce facilities to reach those areas which are not possible for the company to locate its stores at. The company uses word of mouth technique and makes flyers for advertisement.

Service:

One of the major competencies is that the service which the company provides to its customers and its suppliers as well as its employees, is quite excellent. The company allow-sits customers the sales return facility if they are not satisfied with their product or have any other problem with that product. Additionally, the company also keeps a close eye on the customers’ changing needs and then it makes changes accordingly. Providing its supplier shelf space without any fee is another great service which the company provides.

Supermarket Industry Analysis:

According to a study, people of America spend around 10% of their earnings on grocery shopping. Markets and stores use different marketing tactics and promotional activities to attract the customers. Superstores are inclined to run on slim profit margins, these margins usually come from severe competition because of a very minor entry barrier into the market. The superstores typically use sales, coupons and discount vouchers to bring in consumers. For instance: one of the trends is the healthy life cycle that retail stores are trying to take advantage of. The supermarkets can capitalize on such a trend through having a sale or coupon on healthy common staple items. The supermarkets also increase the profit margin on any product, such as: flashlights, batteries and other emergency products. Another way to increase the profit margin is attaining the benefit of economies of scale, in which the products are purchased in bulk so the saving could be kept or passed onto the customers, to increase the profit margin.

In addition to this, various channels are used to increase the profit margin.Supermarkets offer low cost (discount products) or premium (specialized products) to customers, for example: whole Foods is widely known for offering organic natural foods; the 2/3rd sales of which is comprised of the perishable goods, including: prepared foods and baker. The trends and willingness of customers to pay a premium for organic food, have been found at supermarkets, including whole Foods, allowing the organization to remain viable and generate more profits. For supermarkets, the supporting functions include: discount coupons and frequent shopper clubs, which in turn, provides incentives for reward and loyalty for the continued shopping. Trader Joe’s has a different approach to such industry, the typical store of Trader Joe’s has less than 150000 sq. ft. carrying 4000 SKU’s / locations.

A premium is charged from the supermarket chain and the consumers keep paying the premium for natural organic products. Dollar General, a low-cost store has been operating 10000 locations, and it also carries a variety of product range. The company has been adapting the cost leadership strategy to gather a larger customer base, the ultimate objective is to cater to customers with exceptional quality products at a discounted price. All supermarkets always focus on one of the five business-level strategies, including: cost leadership strategy, differentiation strategy, focused cost strategy, and they are focused on differentiation strategy to maximize their market share. The willingness of the customer to spend, depends on the availability of more products or product range at supermarkets, for example:Walmart and target have found that the sales of grocery drive the store traffic, thus leading to the high margin due to the increased sales.

Since the supermarket industry climate has been changing over a period of time, it is significantly important for the stores to sell other items in order to ensure their survival in the ever-changing business climate as Dollar General, Target and Wal-Mart have shown. Trader Joe’s is a differentiated or cost leader, it has followed the blue ocean strategy. Such a strategy has provided Trader Joe’s a niche market to grow locations. A strong supply chain has the potential for determining if and how the firm makes money, not only this it also provide leverage to the supermarkets to a greater extent. The way through which the companies make money is driven by the demand made by consumers. The firm falls into one of the strategic business level strategies has found success with its unique approach. Trader Joe’s, Whole Foods, Wall-Mart, Kroger serve different market segments………………………

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