FOOD LION COMPANY
ANALYSIS
By: Keith Byrns,
FOOD LION INC. 2110 Executive Dr, Salisbury, NC 28147
1
By: Keith Byrns
Table of Contents
Balanced Scorecard…
… 2-3
SWOT Analysis …
… 4-5
Porters five forces…
… 6-7
Resource Similarity …
… 8-9
PESTEL …
… 10-11
Value Chain…
… 12-13
Conclusion…
… 14
References…
… 15
2
BALANCED SCORECARD
Mission – Is to ensure that we remain the low price leader in the supermarket industry without
compromising quality or customer satisfaction.
Vision - We will produce extraordinary results by serving our customers, Associates,
Shareholders, and Communities every day.
Strategy – to promote growth, efficiency, and sustainability as low-cost leader
Financial
 Gain markup
 Keep profits up
Learning and Growth
 New Strategy
 Sustained for long term growth
 Uses mistakes to its advantage
Customer
 Provide great service
 Make shopping easy, fast, and affordable
 Interested in what customers want
Internal Business Processes
 Processing
 Packaging
 Distribution
 Transportation
3
Food Lion wants to be the overall low cost leader in the supermarket industry while still
producing quality products and great customer service. Food Lion’s strategy is maintaining its
low cost provider by following three pillars growth, efficiency, and sustainability. Food lion
wants to continue to grow by expanding in current markets as well as enter new markets to meet
customers’ needs. The private label brand of Food Lion “My Essentials” continues to grow and
offer everyday products at a lower price. Food Lion wants to be as efficient as possible to reduce
wastes and costs. The way they overview how they order, ship, stock, and sell products will help
eliminate costs down the value chain to make products efficiently and affordable. Lastly food
lion wanted sustainability they wanted to develop ways to work differently and see how good a
supermarket can be. By offering private label products they can increase revenues without
compromising their strategy. Food Lion’s sustainability focused on rebuilding based off what
customers said. Surveys and research was used to help collect data to reform this new strategy.
Food Lion wants to make sure they remain profitable by making sure they earn their highest
potential while still maintaining the low price. Food lion has implemented a new strategy in not
only being the low cost provider but by also delivering great customer service. They do not want
to compromise the price of products and want to make shopping enjoyable for customers. The
company is built for the long run and has just remolded all their stores as well. They are
interested in what customers seek is most important in grocery stores and what Food Lion can do
to make their experience an enjoyable one. Food lion has a great internal business process which
makes it easy to process, pack, and distribute to their stores with efficiency. Products are rarely
out of stock at warehouses because of the system Food Lion has in place to ensure that their
shelves are full. They can send products to their other warehouses to ensure that all five
warehouses have the appropriate products that they need for their stores.
4
Strengths




Easy, Fast, Affordable
Adapting to what customers want
Locations Nationwide
Low cost leader strategy
Weaknesses



Known for having low end perishable
High worker turnover ratio
Lower quality of products
Opportunities






Customer Segmentation strategy
Wider product selection
Continue to be low-cost provider
Increased private label sales
Better reward plans for employees
Remodeled stores
Threats



Wal-Mart opening of Supermarkets
Other retailers offering grocery’s
Labor unions
5
Strengths
Food lion has implemented a new strategy that is taught to employees to help customers make
shopping easy, fast, and affordable. A survey taken by supermarket consumers found that being
able to find what they want, finding it fast, and purchasing it at a low price is what was important
to customers. Food Lion has 1,300 stores in the South East and Mid Atlantic to make shopping
convenient and affordable. Food Lion’s low cost provider strategy helps bring customers in
while the great customer service keeps them coming back.
Weaknesses
Food Lion has a bad reputation for having low end perishable. They have recently changed to
prepackaged meat as well as buying local produce. Food Lion’s has a high worker turnover ratio
and has added employee benefits in order to retain employees for longer. Having high ratio costs
money to train and dress new employees.
Opportunities
Food lion has a customer segmentation strategy that it implements in all of its stores. There are
different departments so each one can focus on what is important and deliver what the customers
need. Food Lion has remolded their stores in order to gain market share that they have lost from
straying away from their overall lost cost provider. They have revamped their strategy to make
sure they continue to be an overall low cost provider. Offering their private brand increased sales
and profitability as well as offering customers lower priced product from major brands
Threats
The continuing trend of labor unions could eventually hurt Food Lion. As of right now they have
a no union policy but laws could prohibit companies from enforcing this. Wal-Mart’s opening of
a chain grocery stores could potential threaten their current market share.
6
PORTER’S FIVE FORCES
Threat of New Entrants – Low
 Hard to enter Market
 Not very profitable
Bargaining Power of Buyers – Medium
 Could shop at competitor
 Can switch brands
Threat of Substitute – Low to Medium
 Grow own food
 Dine out
Bargaining Power of Suppliers – Low
 Needs products on shelf’s
 Suppliers depend on Supermarkets to sell their products
Rivalry among Existing Competitors – High
 Many different companies in industry
 Many locations for competitors
7
The threat of new entrants for the supermarket industry is considered low. It is very expensive to
start a grocery store and companies do not just enter just this market without having an
established company. The supermarket industry is also not very profitable and usually only make
pennies for every product sold. The bargaining power of buyers is considered medium.
Customers can go shop at different supermarkets that can offer either the same or similar
products that Food Lion has. Since Food Lion buys their products in bulk to lower costs and to
offer customers the quality of products they want at a low price. Customers can switch to private
brand labels, but for food lion this would increase their sales for their private brand “My
Essentials”. The threat for substitutes in the industry is medium. Depending on the economy
customers may decide to grow their own food or dine out. People need to eat so there will always
be supermarkets. The bargaining power of suppliers is low in this industry. Companies want their
products on the shelf and for some of these products depend on supermarkets in order to make
sales. Since Food Lion has many locations as well they buy products in bulk giving suppliers a
good amount of business. Rivalry among existing competitors for food lion is high. Wal-mart is
opening a line of grocery stores to compete in the industry. Other retail companies such as Target
and K-mart selling retail merchandise as well as groceries will attract customers who want to get
all their shopping done in one place. This makes it more convenient for customers and can
‘reduce Food Lions profitability. As more companies decide to offer the same products as Food
Lion rivalry continues to increase as Food Lion continues to improve ways to stay ahead of the
competition and make them the low cost leader.
8
RESOURCE SIMILIARTY AND MARKET COMMONALITY
9
High Market Commonality and High Resource Similarity
Harris Teeter and other super markets have the same resources and products. Both companies are
high competitors and buy from the same suppliers and therefore have either the same or similar
products on their shelves. The target markets are similar with a savings mentality for both
grocery chains.
High Market Commonality and Low Resource Similarity
Wal-mart has similar resource similarity since it does offer some similar products of Food Lion.
They have a high market commonality because they offer low priced products. It is important to
keep an eye on Wal-Mart because in the future they could move from this area to a High Market
and High Resource similarity with the launching of their new grocery stores.
Low Market Commonality and Low Resource Similarity
Food Lion and 7-11 have a low resource and low market commonality. They do not offer similar
products and therefore do not have the same resources.
Low Market Commonality and High Resource Similarity
Family Dollar has a high resource similarity since they both offer many of the same products.
The market commonality is low because Food Lion is supermarket while Family Dollar offers
products that are cheaper and a more wide variety of different products.
10
Political


Tariffs on international products
Product restrictions
Economic



Global financial crisis
Unemployment rate
Gas prices
Social



Gender
Local Communities
Buying habits/Income
Technological




Self –checkout
Order and Pickup
Rapid technology growth
Research and development
Environmental



Climate change
National disasters
Co2 emissions
Legal




Product recalls
Food Safety/security
Food Regulations
Labor laws
11
Food Lion has products that are outside the country and has to monitor the taxes. If taxes rise
they can reduce their profits and can sometimes compromise their low cost strategy. If products
have restrictions or regulations such as cutting meat they have to follow procedures and rules
which can cost time and money and reduce productivity and profits. If a global crisis consumers
have less income to spend and it changed buying habits. Ensuring the affordability of products is
important as to not change the low cost strategy. A high unemployment rate makes it difficult to
hire quality associates that can deliver. Buying habits and gender influences the type of products
that Food Lion offers. Since women usually do the grocery shopping offering a wider range of
products that attract these customers will raise profits. Local communities play role for Food
Lion since they locate their stores usually in low income and low populated areas to attract their
market. Technology grows fast and keeping up to date with trends and the latest technology will
help Food Lion to grow and be more efficient. Using the developed technology will keep
ordering systems or efficient and help employees complete tasks and procedures in a more timely
manner. Depending on the climate and seasons it can change the sales of products and skew the
numbers that would be used for next year to estimate what to order. Food Lion produces 2.6
million tons of co2 a year which contribute to national disasters. Laws are put into place that
monitors their emissions and puts regulations on it. Food recalls can hurt their image as well as
the products image. If a product is recalled, customers may be hesitant to purchase not only those
products but also other products of that particular brand. To ensure that food is handled safely
and all food regulations are met costs money to ensure that they are followed. Labor laws does
not really affect food lion as they offer good employee rewards as well as treat their employees
correctly. If minimum wage is raised in the future it could compromise the way they do business
and not be able to offer products at low costs.
12
VALUE CHAIN
Support Activities
Firm Infrastructure
 General administration
 Executive committee
 Different management levels
Human Resource Management
 Maintain low cost leader strategy
 Maintain employees that can deliver
Technology Development
 Systems Development
 Product Research and development
Primary Activities
Inbound Logistics
 Raw Materials
Operations
 Progress and Packaging
Outbound Logistics
 Distribution Networks
 Distribution and Transportation
Marketing and Sales
 In- Store Service
 Consumption and Disposal
13
Food Lion’s value chain starts with both growing fresh products and extracting ingredients for
processed products. Products are shipped and packed and sent to the seven different distribution
centers in five states. Having their own distribution centers and warehouses allows food lion to
buy products in bulk quantities and reduce costs. This enables them to offer high quality products
for customers at a lower price. Trucks then deliver it to the stores where employees place the
products on the shelf or prepare them depending on the departments. Food Lion’s marketing
team has developed a low cost provider strategy in order to attract customers while still
providing excellent customer service. Food Lion wants to make shopping easy, fast, and
affordable for customers. They do not want shopping to be a chore and for customers to enjoy
coming to our stores. Food Lion has many different levels of management to keep in check
different departments and to ensure the store is run smoothly. The executive committee manages
the board of directors and can make some authority decisions for the company. Human resources
for Food Lion hire employees and make sure they receive the correct benefits and training.
Human resource management has recently implemented a new training system to help deliver the
expected great customer service. The systems developments for Food Lion has enhanced their
resources and enabled to have a top of the line automatic ordering system. This allows them to
accurately order products and to reduce errors that an employee might make. Food lion has
recently acquired new computers and registers to help enhance a customer’s shopping
experience. They make sure that Food Lion stays competitive in the supermarket industry by
maintaining an overall low cost strategy. The research department created surveys to help better
understand what’s most important when shopping at a grocery store. The way Food Lion
packages their products helps reduce waste and enables the consumer to dispose of it properly
and safely.
14
Conclusion
Food Lion was founded as Food Town and they wanted to provide lost cost products with great
customer service. Over the years they have moved away from this strategy and have just now
started to get back to their roots. If Food Lion continues to implement an overall low cost
provider strategy while also offering quality products, with great customer service they will
continue to flourish. Remolding all the stores and changing the experience customers get when
they shop at Food Lion will be instrumental. This will help differentiate themselves from other
supermarkets and will give customers a reason to shop there. They want to make shopping easy,
fast, and affordable while making shopping fun and not a chore. Food Lion also needs to monitor
food laws and regulations as they are a major impact in this industry. A new law or regulation
could impact not only Food Lion but the supermarket industry as a whole. I recommend that
Food Lion continues to head in this direction and continue to improve in areas that they have
realized are weak. After Food Lion had its grand reopening last week customers have expressed
their approval and satisfaction to the changes that Food Lion has implemented. If Food Lion
continues this strategy I could see them as one of the top supermarkets to shop at in the country.
Food Lion needs to also watch the rivalry with Wal-mart since they are opening their own
version of grocery stores. Wal-Mart has a similar strategy buy being a low cost provider and they
can take away some of the market share from Food Lion when they open these stores. They can
expand their region locations in the future when time permits. Food lion needs to make steps is in
place to ensure that they retain their strategy and do not go back to old habits. Being the low cost
provider is what made them so profitable back in 1957 and they need to make sure that they do
not sway away from their strategy that has worked so well.
15
References
Sustainability Progress Report. (2012, November 16). Retrieved November 10, 2014, from
http://d1pmybhtyfsbgv.cloudfront.net/Assets/Docs/corporate/FoodLion_sustainability-report.v2-2-6917-0.pdf
About Food Lion. (n.d.). Retrieved November 10, 2014, from
http://www.foodlion.com/Corporate/CompanyInformation