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XYZ, Inc. is a publicly owned regional supermarket chain which operates 27 stores located in suburban areas surrounding the Dallas/Fort Worth metropolitan area. In the same market there are two other chains that compete with XYZ. The three chains each possesses approximately 1/3 of the existing market generating gross sales that have continually grown, but constant price competition has driven profit margins for all three stores to the lowest levels in 12 years.
XYZ is located in highly visible, high trafficked areas. Their customers are generally in the upper quadrant in terms of income. Again, the same is true for the competitors, although XYZ does in fact control the most visible locations. For example, of the three competitors, the five stores which have the highest average automobile traffic each day, all are owned by XYZ. Three of these locations exist adjacent to large office parks housing high-tech companies. In all three cases, over 65 per cent of the employees in these companies are professionals with incomes averaging $85,000 per year.
Unlike their competitors, however, XYZ’s physical plant is aging. 19 of the present stores were originally constructed 30 years ago, long before “just on time” deliveries became a norm. The average size of each market is 39,000 square feet. (There is less than 3 percent variance in the square footage among all XYZ locations.) Of that footprint, 15,000 square feet are devoted to storage of inventory. Given present supply chain abilities, the stores only need 5,000 square feet of space for inventory.
The two competitors both entered the market at least 15 years after XYZ. They were in a position to anticipate a smaller inventory space requirement, so their stores are about 29,000 square feet, but have the same selling area in square footage as XYZ. As a consequence, their sales per square foot are higher than XYZ.
XYZ has maintained its profit margins by reducing the number of staff. For example, the company eliminated the use of baggers at the checkout counters in all but the peak sales times. The result of this decision has resulted in customer complaints, and most recently to a loss of sales to competitors.
Presently the Board of Directors and CEO are planning a timetable for store renovation. Their initial plan is to begin renovation of the 5 stores which boast the highest trafficked locations. During the planning for the renovation the CEO asked the Board to step back and consider a new strategy that would create a sustainable competitive advantage over its competitors. The Board agreed to the following.
The Company will position itself as the only “one-stop shopping” grocery chain in the region. In addition to the full array of grocery and pharmaceutical items, XYZ wants to rent office suites to a variety of personal service companies providing such services as insurance, law, investment, banking, health, and daycare. Shoppers and clients will enter the grocery store to access the various businesses.
The goal will be to create myriad “destinations” beyond grocery shopping. For example, a service such as the daycare center would cause users to be physically present in the store more frequently, making grocery shopping at that location a more efficient use of their time.
Discuss at least one concept from each of the readings in Lesson 11 that will be important in implementing the Board’s strategy. In each case:
- Describe the nature of the concept discussed in each of the readings; and,
- Explain to the Board the reason why each concept would be important in developing an implementation plan designed to put this strategy into place.
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