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Business 2000
EIGHTH edition
Types of Competition
Staying focused in a
competitive market
Competition includes all the actual and potential rival product offerings
that a consumer can consider for purchase. There are four types of
competition, when a company sees its competitors as:
◗
Generic competition: Any business that competes for the same
consumer spending. For example, instead of purchasing groceries,
consumers could spend their money on clothes.
◗
Form competition: Any business that creates products supplying
the same service. For example, instead of satisfying my
hunger by buying food in a shop, I could eat in a
restaurant.
◗
Industry competition: Any business
that supplies the same products or class
of products. For example, MSVC is in
competition with all grocery retailers,
whether they are giant supermarkets
or small corner shops.
◗
Brand competition: Any business
that offers similar products and
services at comparable prices. In this
case, MSVC is in competition with
grocery retailers whose stores and prices
closely match their own.
introduction
Musgrave SuperValu-Centra (MSVC) is the retail franchise division of Musgrave Group, Ireland’s largest distributor of grocery products.
Franchising is the method by which permission is given to an entrepreneur to start a business using the name of a franchise owner.
Other examples of franchises include McDonald’s and O’ Briens Irish Sandwich Bars.The franchising system has proved to be
successful because it combines the resources of a large company with the flexibility of small business owners. It is this
combination that has enabled MSVC to stay focused in the fiercely competitive Irish retail industry.
The Irish Retail Industry
An industry is a group of firms that offer products or services that are close substitutes for one another.The Irish retail
industry is comprised of many well known companies, such as Dunnes Stores, Mace, Superquinn, and Spar. Even though
the industry contains many firms, MSVC is the only one that operates in every county. MSVC now services 24% of the
grocery market in the Republic of Ireland and 10% in Northern Ireland through 180 SuperValu and 347 Centra outlets.
To achieve this success, MSVC has had to face up to the significant changes in the retail industry in recent years. For example,
when the British supermarket Tesco entered the Irish market in the mid-1990s it caused many store owners to worry about losing
business. Then, in 1998, the giant German supermarket Aldi opened its first store in Dublin. This was quickly followed by
another German retailer, Lidl. All these changes have resulted in a vast increase in
competition across the industry.
MSVC is engaged mainly in Industry and Brand
competition. This means that it must convince consumers that
the service they seek is only available by shopping at SuperValu or Centra.
To achieve this goal, MSVC has created a sense of differentiation
between its operations and those of its industry rivals.
Differentiation in the
Retail Industry
Differentiation is the process of adding a set of meaningful and valued
differences that distinguishes a company's offerings from those of its
competitors. Differentiation is strongest when it satisfies the following
criteria:
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Business 2000
EIGHTH edition
Musgrave Group - Staying Focused in a Competitive Market
Important: The difference delivers a highly valued benefit to a
sufficient number of buyers.
Distinctive: The difference can be delivered in a clear way.
Superior: The difference is a better way of obtaining a benefit.
Affordable: The buyer can afford to pay for the difference.
Profitable: The company will gain a return by maintaining the
difference.
A common form of differentiation in the retail industry is to sell
goods at the lowest possible price with little customer
service. The aim of this strategy is to achieve
competitive advantage by cutting costs to such a low
level that other firms cannot equal them.
Competitive advantage is the ability of a
company to perform in one or more ways that
rivals cannot or will not match. This pricedriven strategy has been referred to as the
"Pile 'em high, sell 'em cheap" method. It is the
main means of differentiation for both
Aldi and Lidl, who are well known
for having very low prices on
standard grocery items.
While MSVC offers goods at
competitive prices, it has
chosen not to differentiate itself on
the basis of price alone. Instead, it has
decided to build on aspects of the shopping
experience it believes are more important
to Irish consumers. This includes locallyowned business, excellent customer service,
attractive shops, fresh food, and the sale of
quality Irish-sourced grocery brands.
Market Research
In 2002, the grocery magazine 'Checkout Ireland' and the
Market Research Bureau of Ireland (MRBI) undertook market
research to discover exactly what Irish consumers want when
shopping. Market Research is the systematic design, collection,
analysis, and reporting of data and findings relevant to a
specific marketing situation.The research process consists
of four steps:
1.
2.
3.
4.
Define the problem
Develop the research plan
Implement the plan
Report the results.
The findings from the Checkout Ireland/MRBI
research suggested that MSVC has been correct
not to rely too much on price as a means of
differentiation. The survey listed 16 qualitative results
showing the factors that are important to Irish
consumers when shopping. Qualitative results are based on
the independent opinions and attitudes of survey respondents,
e.g., "I think the choice of cereal products is very broad".The opposite
of qualitative results are quantitative results; results that can be measured
scientifically, e.g., "There are 15 cereal products available".
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The most significant findings were the importance of hygiene, cleanliness, and
well designed stores to consumers. The desire for a wide range of brandname groceries was also important. Price ranked almost half-way down the
list and was discovered not to be a concern for almost 30% of shoppers.
As such, it appears that the low cost, low-service strategy of Aldi and Lidl may
not appeal very widely to Irish consumers.While it is true that some people
do go to these stores for certain products, they seem to return to
mainstream supermarkets to complete their shopping.This means that MSVC
can feel confident in its strategy of focusing on excellent customer service and
maintaining clean, attractive shops as a way of attracting business.
Another programme is Mystery Shopping. This is the practice of using
trained shoppers to anonymously evaluate customer service, employee
integrity, and product quality. Mystery Shopping is a form of observational
research. It uses researchers that mimic typical customers and asks them to
observe and record how they are treated when dealing with the company.
This programme is useful as a method of localised market research, as it
gives store owners an honest view of how their customers perceive them.
This can then feed into the process by which the independent store
owners plan for the future of their business.
To this end MSVC invests heavily in initiatives that continually improve the
shopping experience for customers. For example, MSVC requires all its
stores to achieve the National Hygiene Mark even though this is not
required by law.This attracted valuable publicity for MSVC. For example,
the SuperValu outlet in Carrigaline, Co.Cork, was named
Ireland's Cleanest Supermarket in the National
Hygiene Awards 2003. This reinforces the
marketing slogan for SuperValu that says it
represents "Shopping as it should be".
These are examples of the willingness
of MSVC to respond to the developing
concerns of customers about food quality
and its effect on human health. They also
indicate a desire to be perceived as a socially
responsible business. i.e., one that balances a desire for
profit with the potentially harmful effect of its activities on the
community. Another example of social responsibility is MSVC’s
sponsorship, through SuperValu, of the National Tidy Towns Competition.
MSVC Support
for Store Owners
To assist each store in achieving the high standards required, substantial
support is made available. This includes financial planning, quality control,
and information technology services. Furthermore, a number of experts
tour the country assisting local managers with ideas for enhancing their
business. One such initiative is the "Excellence Through People"
programme. This encourages staff to improve themselves and their
performance by perfecting the skills they need to do their jobs.
Business 2000
EIGHth edition
Irish society is now described as "cash rich" but "time poor". This means
that people have more disposable income than ever before, but have very
little time in which to spend it. Disposable income is the money that
remains after regular expenditure has been subtracted, e.g., car insurance,
rent, etc. This change in society has had a significant impact on how
consumers purchase food and groceries.
There has been a huge growth in convenience shopping in the last 10
years. Convenience shopping occurs when people buy groceries as and
when they need them, not by undertaking big weekly shopping trips. The
increase in this type of shopping reflects changes in consumer lifestyles.
Lifestyle is defined as a person’s pattern of living as expressed in his or her
activities, interests and opinions. People today want more choice in when,
where and how they do their shopping. MSVC have responded to this
opportunity by developing and investing in the Centra brand.
Hygiene and Health
Similarly, MSVC has implemented a
unique food quality programme
called FoodTrace.This allows all the
fresh meat sold over its butcher
counters to be traceable back to
the farm of origin. This is an
example of an audit system, a
concept that is mainly used for
financial management. A consultant
nutritionist has also been appointed
to advise about healthy eating.
Changing Shopping
Patterns
Centra, “For the way
we live today”
The Strengths of
Independent Store
Ownership
As a franchiser, the key strength of MSVC is the fact that each store is owned
by an independent business person. Unusually for a franchise business, store
owners are not required to pay a franchise fee to MSVC. A franchise fee is
the amount paid for the use of a brand. All MSVC asks is that each store
purchases through the Musgrave Group, and that it adheres to its established
standards. In every other respect they are free to act as they choose.
For example, if a rival supermarket launches a promotion to attract
customers, a MSVC outlet in the same area can start their own campaign; no
matter what any other store in the group is doing. Experience has shown
that local business owners can react much faster to these situations than
would be possible if all decisions had to be approved by head office.
The freedom created by this system means that independent stores now
account for almost 49% of the Irish retail market. This is against 30% in the
mid-1980s. Such a high percentage of independent retailing is unprecedented
when compared to our European neighbours. In countries such as Britain and
Germany, levels of independent ownership have fallen steadily for decades.
This is mainly because large centrally-owned supermarkets have been very
successful in attracting shoppers away from smaller independent stores. In
Ireland, by contrast, the future of the independent sector is very secure. Much
of this is due to the changing way in which people here are doing their
shopping.
The slogan for Centra is "For the way we live today". This describes how
MSVC has positioned Centra to match the needs of a busy society.
Positioning means building a brand so that it occupies a distinctive place in
the mind of consumers. For example, MSVC wants Centra to be
associated with convenience. As such, many Centra stores now offer late
night shopping, have ATM machines installed, and provide hot food to takeaway. A number of different sizes and formats for Centra stores have also
been developed.This means that Centra can offer a shopping environment
tailored to the needs of local consumers, no matter where they are.These
are some examples of how MSVC has used the marketing mix concept of
the 4Ps to assist it when growing its business.The 4Ps are:
◗
Product: Choices with regard to variety, quality, packaging, and size of
items.
◗
Place: Choices with regard to where or how items are sold, e.g., in
physical stores or through the internet.
◗
Price: Choices with regard to pricing, including discounts or special
offers.
◗
Promotion: Choices with regard to how items are promoted or
advertised to the public.
Glossary
Differentiation: The process of adding a set of
meaningful and valued differences that distinguishes a
company's offerings from those of its competitors.
TASKS & ACTIVITIES
Business
1 Define the following terms;
(a) Franchising
(b) Form Competition
(c) Differentiation
(d) Mystery Shopping
(e) Disposable Income
(f) Relationship Marketing
2 Why is it important to differentiate your product or
service?
3 How has consumer lifestyles impacted on the
development of retailing in Ireland?
4 How has Musgrave SuperValu-Centra (MSVC)
positioned the Centra brand compared to its
competitors? How do you think its slogan helps to
communicate this positioning of the brand in the mind
of the consumer?
5 In your opinion why is it important to develop long
term relationships with customers?
Conclusion
With all the changes that have been experienced in recent years, the main
strength of MSVC has been its determination to practise strong
relationship marketing. Relationship Marketing means building mutually
beneficial long-term relationships with key parties. In the case of MSVC,
the key parties are shoppers and independent business owners. By
focusing on quality customer service and providing assistance to store
owners, MSVC has created an excellent strategy for continued growth in
a competitive market.
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