Report on Morrisons
Introduction牋牋牋牋?
Morrisons is one of the country抯 largest supermarket chains, offering a range of goods in excess of 20,000 different lines, including both branded and own label products. It is also one of the fastest growing retailers in the recent decade in UK. A group of people were assumed as a consultant team to analysis its current business performance and strategy through observation. This report provides analysis by using product life cycle and SWOT for Morrisons current business positioning in the market. In addition, further development recommendations will be provided based on Market Mix analysis from the perspectives of product, price, promotion and place.
Methodology and project process牋牋牋牋牋牋牋牋牋牋牋牋牋
The proper evaluation of current business environment, activities and customer behaviours requires strongly supportive from both qualitative and quantitative data, which will be collected mainly by conducting the inductive research in which to collect data and develop theory as a result of data analysis (Mark Saunders, 2003, pp85). There are different research strategies, for instance, experiment, survey, case study, grounded theory, ethnography, action research as so on (Mark Saunders, 2003, pp91).
The author will adopt ethnography studying as dominated strategy for primary data collection which is firmly rooted in the inductive approach. An ethnographic approach implies intense researcher involvement in the day-to-day running of an organization, in order for the researcher to be able to understand it from an insider抯 point of view. (Alan Bryman, 2003, pp315) This deals in some detail with participant observation and structured observation, the research methods that dominates ethnography (Mark Saunders, 2003, pp93). Participant observation is qualitative and derives from the work of social anthropology earlier in the twentieth century. Its emphasis is on discovering the meanings that people attach to their actions. By contrast, structured observation is quantitative and is more concerned with the frequency of those actions. (Mark Saunders, 2003, pp221). Author interviews some of staffs for more internal information as well.
Secondary data includes both raw data and published summaries which could be both quantitative and qualitative and used in both descriptive and explanatory research (Mark Saunders, 2003, pp188-189). Three main types of secondary data including documentary, multiple source and survey will be adopted by author through organizational records, Internet and organisation抯 surveys.
Business environment analysis (life cycle)?
Product life cycle analysis could provide a clear understanding of current business position for both companies and even the whole industry. In addition, it could also direct the blueprint of future development trend. As it shows in the first curve, product demand is thought to move through four stages. When the product is first introduced, sales and growth are low. Product demand then grows rapidly, but sales level off, and the industry enters a maturity phase (David Besanko, David Dranove, Mark Shanley, 1998, pp95). Eventually, demand declines as other superior products or technologies supplant it.
It is suggested that the current position of supermarket industry in UK has already entered the third stage ? maturity stage because:
l Fewer stronger players survive in UK supermarket industry, only four: ASDA (Wal-Mart),牋 Tesco, Sainsbury, Morrisons.
(1). Asda was acquired by the US corporation Wal-Mart in June 1999. Since being acquired by Wal-Mart, Asda has become the UK抯 third largest grocery retailer, as measured by reported turnover (www.competition-commission.org.uk)
(2). In March 2004, Morrisons completed the takeover of Safeway and became the fourth largest grocery retailer in the UK (after Asda, Sainsbury抯, Tesco,) (www.morrisons.co.uk)
l Sales level off but the profit decreases gradually.
ASDA declared to cut price on both food and non-food products on 04/04/2005 (power.cpgjoblist.com). Only after one day, TESCO began to fight against price war and claimed to launch big reduction on its price. Sainsbury and Morrison planed plenty of promotional strategies as well to react such a price war. Thus, based on the stable consumption in UK price-cutting will decrease its profitability as a whole.
In order to achieve the further development in supermarket industry, it will be essential to find another 搃nnovation point? to inject new power to both companies and industry. As the second curve in chart shows that based on the infrastructures of old industry, new life cycle may experience a short term of the first stage followed by rapid increasing period. The overall industrial level will gain further improvement as well.
The analysis of current strategy牋
The current instructive strategies of Morrisons mainly reflected in five interrelated but different perspectives including targeting market strategy, business structure, price strategy, promotional strategy and development strategy.
l Targeting market strategy: One stop food retailer rather than repertoire shopping
Morrisons targets its business into 搊ne stop? food retailer rather than the strategy of 憆epertoire shopping? which was adopted by Tesoc and ASDA. Although somewhat over 5 per cent of its product range was in non-food items, this was seen as the optimum level and the products selected were those home and leisure items which shoppers would want to pick up with their regular food shopping (such as newspapers, magazines, greetings cards, CDs and DVDs). Even after merger with Safeway this strategy has been taken forward as well. (http://www.competition-commission.org.uk)?
l Business structure: vertical integration with factory infrastructure
The company was unique among the multiple grocery retailers in being vertically integrated through the ownership of some key food production facilities. It owned its own abattoir, meat-packing plant and three produce pack-houses. Fresh meat, dairy products, fruit and vegetables梡redominantly sold as Morrisons? own brands梬ere sourced from in-house businesses. Morrisons said that the success of its vertical integration strategy was shown in the recognition it consistently received for the quality of its own-label food. The strategy also helped Morrisons develop direct relationships with the primary suppliers, including many farmers.
l Price strategy: Unique price, lower price and setting price
A clear business strategy is reflected in the deceptively simple 憀ow prices mane best value? proposition (Andrew Seth and Geoffrey Randall, 1999, 152). In addition, the one-price policy operated since 1958 was the foundation of Morrisons? brand and business mode. Similarly, it was Morrisons? policy not to vary the range of products in a store in response to local competitive circumstances, as opposed to the demographic circumstances of a locality. Moreover, Morrisons considered that it set the market prices in fresh foods, as a result of the vertically-integrated structure of its business. It monitored prices against those of its competitors on a weekly basis across cross-sections of categories. Decisions on whether or not to follow price cuts elsewhere depended on circumstances. Generally, Morrisons priced goods on the basis that its overall offer gave customers good value for money
l Promotional programme
Morrisons was seen as a 憊alue retailer?. It combined low background pricing on-shelf, at levels comparable with most competitors? products, with an extremely strong promotional programme. There were always over 1,000 offers in-store at any one time throughout the product range. Customers told Morrisons that its strong promotional policy brought an excitement and sense of theatre to the stores. In Morrisons? view, the combination of low background pricing and promotions brought overall value-for-money shopping. In addition, The volume of goods leaving Morrisons? stores under its own label amounted to some 55 per cent of the total but Morrisons was unique among supermarkets in not offering a premium product range.
l Development strategy: from regional to national competitor
Before merging with Safeway, Morrisons could be regarded as a sub-scale regional rival in relation to the four members of the strategic group (Tesco, Sainsbury, ASDA and Safeway). Morrisons had pursued a strategy of organic expansion through incremental store acquisition, but this would not allow it to achieve national scope within the foreseeable future. In order to develop to national competitor, Morrisons successfully merged Safeway in 20## and thereafter it could achieve scale advantages relating to procurement and national advertising and so on. Now, Morrisons had already demonstrated its capacity to operate outside its original heartland, having opened stores in the North-East, Wales, the South-East and East Anglia.
SWOT analysis for current business performance
A SWOT analysis is a structured approach to evaluating the strategic position of a business by identifying its strengths, weaknesses, opportunities and threats (David Jobber, 1998, 37). The future development plan and tactics could be formulated thereafter according to SWOT analysis.
Strength :
l North based customer and higher market share (15.6%) after merging
Morrisons is highly regional with a strong presence in the Northern England and across Yorkshire and the Midlands, but only marginal presence in the South where Safeway represents a key point of entry. However, Morrisons has the most of gain from acquiring Safeway in 20## which drives Morrisons achieving the national scale with 15.6% market share in UK retailing industry. Higher marketing share and strong Northern based customers make Morrisons strong competitiveness in retailing industry.
l Price and promotion based on integration strategy
Lower price and muti-promotioanl policies are two of the most significant issues to attract more customers. Because of the integration business structure with supplier, Morrisons could provide lower prices for most of foods and even non-food items especially on KVI (known value item) with an extremely strong promotional programme running for four-week periods. Frequently over 1,000 special offers have gain great customer loyalty and satisfactions.
l Location in town centre: more convenient
Convenient is anther un-beatable advantages for Morrisons regarding to its location strategy compare with Tesco and ASDA. The average 40,000 sq spaces makes Morrisons possible located in the town center where may deliver more convenience to customers. In addition, two hours free parking policy provides the sense of attractiveness and flexibility to customers as well.
l Own-brand, more options
The comparative higher percentages of Morrisons own branded foods (55%) are a advanced advantages to gain higher value of brand imaginations (www.checksure.biz). In addition, Morrisons offers more options with similar or same foods. For example, Morrisons had 74 products in its chilled pizza range, whilst Asda抯 offer had fallen to around 46; Morrisons had a canned meat offering of 122 products, whilst Asda offered about 51; Morrisons offered 113 canned fruits, against Asda抯 87.
Weakness:
l Insufficient economy of scale and scope牋牋牋牋牋牋牋牋牋牋牋牋牋牋
Compare with competitors including Tesco, Sainsbury and ADSA, Morrisons suffers lower level of economy of scale and scope on both price and products perspectives as before 20## it only has around 120 middle sized shops in UK. While ASDA (Wal-Mart), Sainsbury抯 and Tesco has 258, 498 and 779 separately in the same time in UK (www.j-sainsbury.co.uk). Although Morrisons mergered Safeway, however, three of its competitors are all international giants in retailing industry. Wal-Mart owns more than 4000 supermarkets all over the world while Sainsbury has 185 in USA and Tesco franchised its brand into 10 countries in Europe and 79 supermarkets in Asia.
l New entrance to south of England牋牋牋牋牋牋牋牋牋牋?
Although merging with Safeway leads Morrions to national competitor in retailing industry, however, it is still a new comer to the market in south of England where Tesco, Sainsbury and ASDA have already captured most of market share. It will be very difficult to build up customer loyalty in south of England.
l Insufficient options牋牋牋牋牋牋牋牋牋 牋牋牋牋牋?
Morrisons is a food retailer rather than repertoire which could provide most of commodities customers needed in daily life. Thus, the insufficient products options may have less attractiveness to those customers who requires not only foods but also non-food issues. Therefore, food retailer strategy may lose some of 搊ne stop for all? customers.
Opportunities :
l On-line selling牋牋牋牋牋牋牋牋牋牋?
On line selling has become more popular than ever before which covers most of commodities in daily life except foods. Therefore, the new trend of on-line purchasing foods and related products will be a new innovation point for retailing industry. Although it needs the pre-investment of setting up on-line selling system and policies, the potential market is still attractive for all retailing competitors.
l Multi-functional supermarket牋牋牋
Supermarket has been recognized as not only places to purchase but also to keep relax in different ways. Thus, the further development trend of supermarket has shown the strong preference to multi-functional market with various sorts of services. Mottisons has already tried to integrate restaurant into its store so that to bring more convenience to customers. However, it is far from enough. It will be more attractive if shopping, amusement or even educational issues could be integrated to some extent.
l Diversity development牋牋牋牋牋
Diversification is another significant development trend of retailing industry which could reflected on not only the perspective of increasing quantity of products but also the services forms. For example, retailing companies normally have the characteristics of high turnover rate and profit rate with huge amount of saving. Hence, it will be possible to offer diversified services such as insurance service, or other forms of financial services.
Threat:
l Digestion problems牋牋牋牋牋牋牋牋牋牋牋?
After merging Safeway, 揹igestion problems? is one of the most threat for development. There were many operational differences in the way the two companies were organised and the cultures had little in common. The task of integration was difficult and the introduction some weeks prior to takeover of a completely new accounting system by the previous directors and management of Safeway made the job much more complicated. Insufficient training had been undertaken and the system had not been thoroughly proven prior to its introduction. Any problems in the processes of integration may cause potential weakness both financially and managerially.
l Population in some location (Aberdeen)牋牋牋
Reduction of population and changeable population structure in some areas in UK will threaten the whole consumptions as a whole because youth shows different purchasing preferences comparing with old people. For instance, Aberdeen population has suffered recession for 10 years since 1994 according to government statistic report and local people over 45 will be 48.15% until 20## as a whole. Thus, the total consumption of retailing industry in Aberdeen area will suffer the trend of decrease in the long run.
牋牋牋牋牋牋牋牋 Population Trends in Aberdeen
牋牋牋牋牋牋牋牋牋 Resource from www.aberdeencity.gov.uk
l Competitors with price war牋牋牋 牋牋牋牋牋?
The fierce competition of retailing industry brings heavy pressure on Morrions especially just after merging Safeway. Such a merging causes financial shortages to Morrions in some degrees which stresses Morrisons a lot, in addition, price war derived from ASDA on the fourth of April this year gave a strong strike to Morrisons as well. Moreover, Tesco and Sainsbury have reacted such price war through price cutting soon. Thus, it will cost a lot for Morrisons to fight back in order to keeping their customers and market share.
Recommendations on future strategy牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋
According to SWOT analysis, the strategies for future instructive development should be mainly focused on maintaining the exist advantages, overcoming current shortages and capturing potential opportunities. Generally speaking, there are four aspects including keeping differentiation on marketing positioning, providing more product options with higher quality, conducting flexible price policy and trying new way of selling.
l Differentiation on market positioning: Downmarket
Broad differentiation, which seeks to be unique in terms of dimensions widely, valued by buyers, and which is also different from competitors (Gerry Johnson and Kevan Scholes, 1998). It is suggested that to keep the differentiation on market positioning could provide the orientation of future development in a long run. For example, originally, Safeway is targeting at little upfront market and WM Morrisons at downmarket. After merging, Morrisons needs to keep its differentiation on positioning to downmarket.
l More products with higher quality
It is believed that the current strategy on 揻ood retailer? is suitable for Morrisons and should be conducted without any compromise. Currently, Morrisons provides more than 20,000 different products and many favourite top brand names there is an extensive its own label range. However, the extending of scale needs to accompany with enlargement of scope. 20,000 options for a retailing joint with 15.6% market share is absolutely insufficient. In addition, Morrisons ought to put more effort on increasing quality of their products as well as quantity as lower price with higher quality is the mission of Morrisons as it announced.
l One price on regional based rather than national based
The current price strategy is stable price for same product in all supermarkets which is only suit for middle scaled regional rival. However, it will be very costly to keep one price policy in more than 500 supermarkets in different UK shires from higher earning standard south (London) to lower standard north (Aberdeen). Therefore, price strategy needs to be more flexible and price setting should be regional rather than national based.
l On-line selling, an innovation point for new product life cycle
As explained in product life cycle and Opportunity analysis, old fashioned retailing style has leaded industry entering the third stage, an new innovation point needs to be build up based on exist infrastructure with timely fashion approaches. Thus, foods on-line selling is an appropriate new blank area with no footfall of any other competitors.
Marketing mix analysis for future development牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋
SWOT analysis provides clearly strategic position of current business while future strategies direct explicit orientation of development. Details on how to conduct these latest strategies will be illustrated through Marketing Mix (4P) investigation.
l Product: food and non-food
1. Food products:
u To enlarge the percentage of Morrisons own label for high value brand imagination
u To provide more options on same or similar products in deferent price range to attract more customers with various preference.
u To provide more detail on nutrition components for each food in order to deliver the healthy conception to customers.
u To provide more 揜eady to eat? foods for 搕imely consuming? customers such as working people, youth.
2. Non-food items:
u To provide more sorts of cosmetics on individual cosmetic kiosks
u To offer different pharmacies for health caring
u To provide daily commodities on arrange of counters
l Place: real place and on line web site
1. Place in real:
Morrisons? current strategies for location is to build up supermarkets in town centre so that to deliver product more conveniently. This strategy is quite successful for small to middle sized grocery in the north of England where Morrisons began. However, further development in south of England needs to adopt different strategies because:
(1). The cost of renting fee in town centre is much more expensive than those outside the town
(2). The space limitation in town centre supermarkets restricts the number of on-shelf product which influences turnover directly
(3). The conception of 搊ne stop? purchasing in large city is more wider which required more options on commodities.
Therefore, new supermarkets in south of England should be built on the city side with large free parking space in order to achieve economy of scale and scope. On the contrast, expansion on north of England and Scotland need to focus on city centre.
2. Place on net: Web site:
On line purchasing policy needs to be supported by multi-functional official web site. Various payment methods should be accepted such as: visa card, master card and debit card. In addition, on line ordering and door-to-door delivering service should be included on the basis of certain amount of purchasing. Further more, individual details on line should be secured for the safety consideration.
l Price: more flexible in various location
Price policy needs to achieve more flexibility in order to constrain and react local competition and price war as a whole.
u Differentiation on price should be set up based on the various regional living牋 standards. As a whole, price on same product will be higher in south of England than north of England and Scotland.
u The 搇ower than cost? prices strategy could be conducted on some Know Value Items in order to built up imaginations on higher 損rice value?. Such a strategy will attract more rational customers who always seek lower price but will increase the binding purchasing behaviours and re-purchasing behaviours which will cover the lose on 搇ower than cost? products.
u Lower price for on line purchasing needs to be offered to encourage and change customers? buying behaviours.
l Promotion: products, service and supply chain
Promotion on products:
u To provide higher quality foods with out price raising
u To advertise more on different medias in order to attract more customers such as Morrisons advertising magazine, Morrisons advertising newspaper and www.morrisons.co.uk and so on.
u To offer more approaches for sales promotion and loyalty enhancing such as club cards, vouchers and so on.
Promotion on service:
u Multi-functional supermarkets need to satisfy different requirement for various customers. For example, it needs to provide some places for having meals, also children caring place for shopping parents.
u Door to door delivery for disables or special order and donation for charity will increase the customers satisfaction and social imaginations.
u Information map in front of main entrance may guild time consuming customers to whatever they needs directly and more conveniently.
Promotion on supply chain after merging:
u The original Safeway supply chain needs to be integrated into Morrisons integration business structure so that to keep the cost advantages on its supply chain service.
u For the third party supplier, more close and direct relationship will enhance the benefit for both parties. The policy of direct dealings with farmers, growers and other producers would be extended following a merger with Safeway.
Conclusion牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋牋?
Morrisons has become the fourth largest retailer in UK after merging Safeway in March 2004. The life cycle analysis shows that UK retail industry has entered maturity stage in which new innovation point needs to be exploited for further development. The current marketing strategic performance was leaded by current targeting market strategy, business structure, price strategy, promotional strategy and development strategy. In addition, SWOT for such a performance provides explicit picture of its current business positioning which directs the future expansion strategies including keeping differentiation on marketing positioning, providing more product options with higher quality, conducting flexible price policy and trying new On-line selling strategy. At last Marketing mix (4p) analysis illustrates the approaches of conducting these new marketing strategies mentioned above. It is recommended that setting flexible price police in various locations, enriching product with higher quality service, improving supply chain management should be listed on the Morrisons further development agenda.
Bibliography
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