Acquiring and Sustaining Competitive Advantage: Analysis of Waitrose - Case Study Example

Issues in Competitive Advantage Name Course Name and Code Instructor’s Name Date Executive Summary Acquiring and sustaining competitive advantage is not an option for contemporary organizations and institutions. To effectively counter stiff competition, efficiently satisfy the rising and shifting demands of customers, enhancing the market share and improving profitability is dependent on developing valuable, unique and inimitable core competencies, resources and capabilities. Using Kanter’s new wisdom and the D& W model, this report will analyze Waitrose’ competitive advantage and identify suitable recommendations that will enable the company counter its pressing challenges. Table of Contents Executive Summary 2 Introduction 4 Recap on Assignment 1 4 Q2: Analysis of Waitrose’ current competitive advantage - Kanter’s New Wisdom 6 Core competence 7 Time compression 7 Continuous improvement 8 Relations 9 Q3: Analysis of Waitrose’ current competitive advantage - D&W Model 10 Q4 13 References 17 Introduction Globalization and technology advancement has led to stiff competition, increased bargaining power for the buyers and availability of substitute products in the market as indicated by Gary & Prahalad (2000). This has led to increased need for the organizations to develop and implement strategic plans, systems and structures that are feasible in not only enhancing their ability to efficiently and competently meet the needs, preferences and expectations of the end user, but also, attracting and retaining new customers, increasing the market share and enhancing their sustainable competitive advantage (Porter, 2008). This report seeks to highlight Waitrose, a player within the UK fresh produce retail industry. In addition, analysis of Waitrose competitive advantage using attributes of Kanter’s New Wisdom and the D&W Model. Finally, the report will offer recommendations necessary to counter challenges facing the company. Recap on Assignment 1 The UK fresh produce retail industry is a well-grounded, competitive and adaptable industry associated with effectively and efficiently meeting the changing and rising consumer needs and preferences. The Industry handles the distribution of both fruits and vegetables where the latter register higher consumptions rates than the former. There has been a retail market evolution gearing towards establishment of vertically aligned chains that serve supermarkets in the United Kingdom. The threats of new entrants within the industry are few owing to the high barriers to entry that allows only a few entrants to penetrate (Waitrose Case Study). In UK fresh produce retail industry, the buyer bargaining power is relatively high, an unfavorable factor for retailers while the supplier bargaining power is low, a favorable factor for retailers. There are no substitute products within and without the industry and thus, consumers have no option but to purchase the products and services offered by the industry (Waitrose Case Study). Nevertheless, the stiff competition within the industry hinders its growth. The 44.7 concentration ratio within the industry is illustrative of a perfect competition platform where major players compete for equal resources and consumers and owing to slow market growth, are compelled to fight for the existing market share. Among major retail players within the UK fresh produce retail industry includes Tesco, J. Sainsbury, Asda, Safeway, Somerfield, Co-op, William Morrison, Marks & Spencer and Waitrose, and global supermarkets such as the Wal-Mart (Waitrose Case Study). Waitrose, a player within the UK fresh produce retail industry although it has a relatively smaller market share in comparison to other industry players, has formulated and implemented the ‘category leadership’ strategy, which has enabled Waitrose to achieve a 5% market share in fruit retailing products by the year 2000 as highlighted by Waitrose Case Study. The company faces stiff competition from the industry’s players such as Tesco and Sainsbury among other supply chains, since the consumers have a wide choice of substitute retailers to choose from. Waitrose has developed its operations to add value to their products which is vital in attracting, retaining customers and sustaining their competitive edge. Among value adding operational activities include inbound logistics, operations, outbound logistics, marketing and sales, services, infrastructure, human resources management, technology development and procurement. The three main challenges facing Waitrose includes stiff competition from larger players involving Tesco, Sainsbury, Asda and Safeway that have specific market share in which they distribute their products. Retailers that are competing with Waitrose on a similar scale are Marks Spencer and Sainsbury who use the “taste the difference” tactic, in the hope of encouraging Waitrose consumers to shop in their stores (Waitrose Case Study). This force of rivalry has been unfavorable for Waitrose and thus resulted in a low market share for the firm. The other challenge facing Waitrose is the reduction of its costs and growth in its product category in achieving competitive advantage in the industry. This is associated with low rates of fruit consumption in UK owing to regular annual fruit availability, changing trend in the commodities preferred by the consumers towards choice and quality, and prevalent of supermarkets that sell variety of produce (Waitrose Case Study). Buyers are now seeking variety of produce to choose from and will shop at supermarkets providing such benefits. The third challenge of Waitrose is the changing trend in the fresh produce supply industry where the introduction of the supermarkets has led to the decline of many wholesale markets and marketing agents as supermarkets has reduced the supply base of the products leaving the retailer such s Waitrose with a limited number of suppliers. Q2: Analysis of Waitrose’ current competitive advantage - Kanter’s New Wisdom Contemporary firms are shifting their focus from establishing their planning in cutting costs and differentiated features to establishing capacities to respond and react as mentioned by Vandenbosch & Dawar (2002). They are doing so by using core competences, time compression, continuous improvement and relations to enhance their competitiveness as described by Harvard Business Review (2000). Core competence Developing core competencies involves a firm focusing on its distinctive skills, core strengths and discarding activities that do not add value (Harvard Business Review. 2000). At the Waitrose, the company has not fully developed and implemented distinct skills and capacities that are unique to them. Nevertheless, what the company has done is to focus on being an early adopter of technology and developing value adding systems and activities such as improving its inbound and outbound logistics, HR management and procurement and investing in technological solutions and innovations like the MarketMax. MarketMax is an innovative space planning software that allows Waitrose to develop competitive distinctiveness by optimizing space organization and developing planograms for every Waitrose store respectively (Waitrose Case Study). The company has fallen short in establishing core competencies as illustrated by lack of variety of produce for buyers to choose from and the inability to initiate the ‘ taste the difference’ approaches used by its competitors. Time compression Time compression entails competitively competing on time using mechanisms such as just-in time, first mover advantages, rapid response to market trends and innovation to attract, retain and develop strong brand and customer loyalty (Harvard Business Review. 2000). To effectively compete on time, Waitrose has not only capitalized on first mover advantages associated with its focus on being early adopters of technology in industry, but also facilitating market research programs meant to identify the present and future purchasing and consumption trends and patterns of produce buyers in a bid to develop and deliver value added products that meet their demands (Waitrose Case Study). Through streamlining the supply and distribution chains, the company has been able to reduce the amount of time taken to supply, produce and deliver produce in the market. This plays a major role in Waitrose being the first retailers to not only introduce new product segments into the UK fresh produce market, but also, efficiently and promptly producing and delivering products that meet the rapidly changing conditions, demands, tastes, preferences and expectations of the environment and the customer respectively. Continuous improvement Continuous improvement involves systematic product, services and process improvements centered on measures, feedback and learning meant to enhance a firm’s competitiveness (Smit, 2000). Among major challenges facing Waitrose is the reduction of its costs and growth in its product category in achieving competitive advantage. The company has not been able to fully develop and implement systems that are competitive enough to counter the emerging trends of more consumers preferring value-added items like seedless grapes, low demand for fruits and the inadequate variety of categories of products. However, the company has invested in modern technology to improve operations, productions and delivery of goods, designing value adding activities like inbound and outbound logistics, marketing, human resource management and procurement and creating systematic product, services and process improvements centered on measures, feedback and learning meant to enhance Waitrose’ competitiveness. In addition, the company has incorporated the distribution of seasonal products and used innovation in marketing their products (Waitrose Case Study). The company focuses on longer-term horizon which puts more emphasis on developing initiatives that are sustainable to generate future outcomes. Relations Relations entails developing strong, effective and stable interrelations and collaborations between the firm and its internal and external environments that comprises of suppliers, marketers, business partners, investors, shareholders, the management and employees among others (Harvard Business Review. 2000). Waitrose has excelled in developing healthy interrelationships between the firm, its produce growers, its suppliers, marketers and buyers to develop strong and reliable links that foster collaboration. Favorable employee working environment, relationships and job stability of 3-4 yrs encourages development and implementation of new plans. This is vital in developing deep understanding of produce industry and retailing. Stronger links have been developed internally by retail operations and marketing teams with the suppliers and the growers that are meant to increase effectiveness and efficiency as suggested by Harvard Business Review (2000). This has been realized through the ‘whole chain view’ and the ‘triple bottom line.’ Growers are perceived as Waitrose growers, essential in cutting costs, enhancing produce categories and negotiating with growers and suppliers to streamline the chain. To counter the challenge of stiff competition faced by Waitrose and the changing trends in the fresh produce supply industry whereby the introduction of the supermarkets has led to the decline of many wholesale markets and marketing agents, the company has invested in technology and innovations. This resulted in development of reliable, loyal, and strong interrelationships with growers and suppliers respectively (Waitrose Case Study). This has not only helped the firm sustain its competitiveness against its competitors and minimize the impact of having limited number of suppliers, but also in enhancing its core strengths. Other factors include discarding activities that do not add value, enhancing collaboration in quality production and delivery, regular modifications of all aspects of operations to increase value and efficiently meeting the changing demands of customers. Using Kanter’s new wisdom, Waitrose is headed on the right direction in acquiring and sustaining its competitive advantage within UK fresh produce retail industry. This is because the company has focused on developing empowered and knowledge-based human resource, work processes and operational systems that are aligned to flexible organizational structures that accommodate knowledge sharing, communication along and across structures, continuous learning, fast value delivery, recognizing achievements, innovativeness and creativity as suggested by Smit (2000). Q3: Analysis of Waitrose’ current competitive advantage - D&W Model According to D& W model, competitive advantage comprises of systematic cycle of varied elements that an industry and a firm has in order to adequately and efficiently sustain its competitiveness. They include sources of advantage that comprises of superior skills and superior resources that an industry or a firm has over and above its competitors in terms of personnel knowledge and abilities and tangible requirements for advantage that allow it to exercise its capabilities proficiently (Day & Wensley, 1988). In addition, positional advantages that comprises of superior customer value and lower relative costs, performance outcomes comprising of satisfaction, loyalty, market share and profitability that leads to investment of profits to sustain advantage. Using the D& W model to assess the UK fresh produce retail industry, the competitive advantage of the industry lies in the low supplier bargaining power of suppliers stemming from having suppliers with undifferentiated products and the increased number of suppliers and supply chains in the industry and the high barriers to entry. This means that the industry is not under any pressure and existing participants compete for equal resources and market share. The differences between and within product categories in UK fresh produce retail industry are characterized by increased per capita uptake of fruits than in vegetables and increased usage of seedless grapes over seeded ones provide significant chances for product differentiation and market segmentation among the industry players (Waitrose Case Study). Key success factors are the critical elements and features that are needed for ensuing proficiency, adequacy and effectiveness of a firm or an industry as defined by Mazzucato (2002). The key success factor of UK fresh produce retail industry includes superior skills and resources that enhances healthy competition among industry players which ensures that the end users are able to get value for money, their needs, preferences and expectations are efficiently and effectively met and it ensures products are produced and delivered at relatively affordable prices. The integration of technological advancements and innovations in developing value-added activities and systems within the industry has ensured that products produced and delivered at the outlets are valuable, unique, and meet the needs of the consumer. This means they are able to adequately counter and adapt to the changing trends within the fresh produce retail industry as suggested by Day & Wensley (1988). The success factors for Waitrose includes development of differentiated positions that foster creation of value adding activities such as inbound and outbound logistics, HR management, procurement and technological development that buyers are willing to buy at premium costs to acquire the benefits. In addition, development of employees with superior skills which is realized by allowing employees to stay in one position for 2-3 yrs in order to fully learn the produce retailing and industry and to develop feasible and appropriate new strategies. Among other key success factors include development of superior resources that are imitable, unique and valuable. In addition, the strong links with growers and suppliers ensures that the company has a constant and reliable supply of quality products that meet the customer’s rising demands regardless of the limited number of suppliers (Day & Wensley, 1988). Being an early adopter of technology is a success factor that has helped Waitrose improves on its space planning, marketing, procurement, promotion and advertising and developing new product categories to fully satisfy the divergent needs of its shoppers. Waitrose has achieved relevant sources of advantage which includes superior skills illustrated by development of personnel capacities about the produce industry and produce retailing. In comparison to other major industry players, Waitrose has been able retain employees long enough in their positions for them to develop in-depth knowledge on the industry, as they spend substantial amount of time in produce as a part of career progression across a variety of categories. In addition, adoption of modern technologies such as MarketMax helps the company to adapt more responsively and quicker to market changes. Waitrose has superior resources through enhancement of her systems resources that enables it to cut on costs of processes between the growers, suppliers and to the customers. This is essential in managing inventories, assessing market data and planning new product development initiatives (Hemmatfar, et al., 2010). Waitrose has also attained positional advantage through differentiated positions acquired by creation of value adding activities that include outbound and inbound logistics, procurement and technological development among others. By being an early adopter of technology, the company has been able to offer innovative features in not only in the categories of produce but also in space planning (Waitrose Case Study). The positional advantages that matches the industry’s KSF’s are differentiated positions which are illustrated through provision of superior service, using strong brand names, giving innovative features and offering superior product quality among industry players. The performance outcomes of fresh produce retail industry include enhanced customer satisfaction with the products offered, increased market share and profitability for players within the industry. Waitrose has invested part of its return on investments on advertising, publications, technology development, employee training and development, innovation, human resource management, procurement and in streamlining delivery and supply chains. Waitrose has partially succeeded in incorporating aspects of sources of advantage, investing profits, positional advantages that have resulted in positive performance outcomes suggested by the D& W model. Q4 The three most significant and pressing challenges that Waitrose should address in order to improve its competitive advantage include relatively small market share. This stems from stiff competition from equal players such as Marks Spenser and Sainsbury and bigger competitors such as Tesco, Asda and Safeway majority of whom have established and specific market share in which they supply their products (Waitrose Case Study). In addition, Waitrose is unable to use the ‘ taste the difference’ approaches used by its rivals, which so far has been successful in pulling away Waitrose consumers, thereby, shopping in competitor’s stores. This has had a detrimental effect on Waitrose market share. Matters have been made worse by the increasing importance of major supermarket chains and the diminishing roles, functions and significance of wholesale markets and marketing agents. The few remaining have transformed into pre-packers playing the role of middlemen between supermarket chains and growers. The negative effect has been limited number of suppliers in the market make it particularly hard to cheaply, efficiently and adequately procure produce and ready it for market (Waitrose Case Study). Eminent delays that ensue have had a part to play in consumers switching to and from the variety of players within the UK fresh produce retail industry as they seek not only the most efficient retailers but also those with variety of produce categories to choose from. The recommendation to counter the relatively low market share stemming from stiff competition that Waitrose faces is development of core competencies. Where Waitrose formulate their own distinct skills and resources that are peculiar to the company that separates their products from the rest, that are unique, inimitable, un-substitutable and which are costly for the competitors to copy as suggested by Harvard Business Review (2000). In addition, investment in varied drivers of differentiation which includes formulation and implementation of policy choices about what actions to take and how intense to carry them out comprising of specific aspects of operations, performance, amount to spend on advertising, categories of products to distribute, skills and competence of human resources tasked to perform the actions (Day & Wensley, 1988). It also entails co-ordination and collaboration along and across function units to quicken order handling, product delivery between the firm, growers and suppliers and finally to the customer. Developing core competence and investing in varied drivers of differentiation will help Waitrose in producing and delivering quality, unique and efficient products that helps in retaining and attracting existing and potential customer respectively, strengthening the brand, and improving brand and customer loyalty necessary to expand the market share as implied by Hemmatfar et al. (2010). The other pressing challenge is the reduction of its costs and growth in its product category in achieving competitive advantage in the industry. Consumers are seeking value-added items such as seedless grapes, rather than seeded grapes (Waitrose Case Study). The consumption rate for fruits in UK has also been dwindling owing to inaccessibility and unavailability of fruits in majority of seasons. Majority of customers are having a preference for choice and quality (Waitrose Case Study). The recommendation to counter the challenge is to identify opportunities through market segmentation and product differentiation as suggested by Vandenbosch and Dawar (2002). In addition, systematic improvements on products and processes based on measures, feedback and learning to ensure, the company is able to keep pace with the changing industry and market environments and the shifting preferences, tastes and needs of their consumers (Harvard Business Review. 2000). The third challenge is changing trend of consumers preferring to shop in supply chains such as supermarkets that offer a variety of produce categories. This is attributable to the increasing significance of supermarkets and the declining importance and role of wholesale markets and marketing agents. The recommendation is initiation of positional advantages of establishing superior customer value and lower delivered costs positions by performing majority of value-adding activities at relatively cost-effective prices than its competitors while distributing parity produce categories as highlighted by Day & Wensley (1988). The low cost advantage and superior customer value will help in sustaining brand and customer loyalty and enhancing the company’s competitive edge. Development of core competence, investment in varied drivers of differentiation, market segmentation, establishing of superior customer value and use of lower delivered costs as appropriate recommendations to counter the pressing challenges facing Waitrose. These are essential and suitable in aligning the company against the high threat of rivalry between existing competitors in the industry, capitalizing on the low bargaining power of suppliers within the industry and enabling Waitrose to create value for its customers which exceeds the cost of creating it (Porter, 1985). The recommendations are essential in enabling Waitrose to enhance its efforts in retaining superior skills and superior resources, offering superior customer value, and having cost advantage compared to its competitors. This will result in positive performance outcomes that includes enhanced satisfaction of the needs, expectations, preferences and tastes of the customer, improved brand and customer loyalty necessary for encouraging return business that compounds to attracting potential customers that leads to increased market share and improved sales in volumes thus, profitability for Waitrose as highlighted by Day & Wensley (1988). With high return on investments derived from positive performance outcomes, positional advantages and sources of advantage, Waitrose will be able to invest some of the profits to sustain its competitive advantage that can be directed towards advertising, technology development, innovation and invention, human resource management and streamlining supply and distribution chains. References Day, G.S. & Wensley, R. (1988). Assessing advantage: A framework for Diagnosing Competitive Superiority. Journal of Marketing, 52, 1-20. Gary, H., & Prahalad, C. (2000). 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