Executive Summary
This report provides an analysis and evaluation of Kroger’s current culture, financials, organizational structure, strengths, threats, opportunities, and weaknesses, and its current existing strategies. It also deeply analyzes the concept of formulating and successfully implementing a new strategy for the company. Results of the internal and external forces that make up this organization are found throughout the report. Kroger is a company that focuses strongly on its customer. It can be concluded from this report that Kroger needs to implement a new strategy that still focuses on the customer, but more specifically focuses on meeting more of the customers’ needs and doing so at competitive prices.
Findings
Kroger is a company that deeply cares about its customer (Kroger Co., 2017b). If Kroger makes the right changes to its strategy, it can remain a leader in its industry (Watkins, 2017a). Kroger’s existing strategies work well, but because of existing market trends, there is a chance that Kroger will not be able to keep up and will miss out of large profits and opportunities (Nash, 2017). Kroger has the choice of competing with these current market trends, such as delivery of groceries, but I believe that if Kroger hasn’t jumped on this strategy yet, that they won’t any time in the future. Kroger offers many reasons why its current customers continue shopping at its stores, but the company needs to develop a strategy (such as the one recommended in this case study), which will successfully bring in new customers.
Recommendations
My main recommendation of a new strategy for Kroger based off my research is that Kroger acquires cheaper vendors within its supply chain that allow the store to provide the highest quality and most in-demand products within the natural, organic, and non-GMO food groups, all while offering these products at the cheapest prices compared to any competitor. Kroger should invest in R&D to learn which of these products are highest in demand, and what they should be priced at to beat competition while still earning Kroger a profit. Kroger should also continue its existing Customer 1st strategy for the remainder of its lifespan as a company, and revolve any new strategies around the Customer 1st strategy, ensuring the customer is the thought behind every strategic maneuver the company makes in the future. The main, new strategy of attaining a new supplier should be planned and implemented as soon as possible. Alignment is already possible because Kroger’s current culture is based on serving the customer first (Kroger Co., 2017b). This new strategy’s end goal is to better serve the customer, so it will be very possible for Kroger to achieve. The organization will take action by gathering the chairman and divisional leaders of the stores and formulating the strategy and seeking a new supplier. Then these leaders will meet with management at every Kroger store and discuss and train them on the new strategy to be carried out. Customer loyalty, organizational credibility, and profits should increase for Kroger as a result of this strategy. This strategy should be reviewed and revised once a month at month’s end in addition to the two weekly meetings reviewing goal progress.
STRATEGIC STUDY
Historical Background and Present Context
In 1883, Barney Kroger founded Kroger in Cincinnati, Ohio (Kroger Co., 2017b). Today, Kroger is known as one of the largest retail grocery companies in the industry today, with nearly 3,000 stores and operating in almost all 50 states (Kroger Co., 2017c). Kroger offers a store format to fit nearly every shopper’s needs. They include supermarkets, multi-department stores, marketplace stores, convenience, and fine jewelry stores, as well as fuel stations (Kroger Co., 2017b). Kroger offers a wide variety of products, such as jewelry, pet brands and products, fresh food, fresh meat, a bakery, a pharmacy, and natural and organic food. Kroger operates on six core values that stand behind the company’s culture and values. They are honesty, integrity, respect, diversity, safety, and inclusion (Kroger Co., 2017a). “Kroger operates 38 food manufacturing facilities that make thousands of products ranging from bread, cookies and milk to soda pop, ice cream and peanut butter. About 40% of private-label items found in the company’s stores today are made at one of Kroger’s manufacturing plants. Our Brands today account for an impressive 26% of Kroger’s total store dollar sales, providing the company with a significant strategic advantage†(Kroger Co., 2017b).
Important trends that are affecting the organization and the industry are the trends of purchasing groceries online. This is a trend that can affect the entire grocery industry and change the way consumers shop if they one day decide in a mass amount of numbers and agreement that they are no longer interested in shopping at a brick and mortar store. The trend is possibly aiming at the reality that consumers will be able to purchase groceries from the comfort of their own homes and have those groceries delivered to their doorsteps, thus eliminating the need to go shopping in store. Because of Kroger’s dedication to its customers and its high customer loyalty and popularity, Kroger is a company that will have to make accommodations and necessary changes in order to better fulfill the growing and changing needs of its customers and the changes within the industry.
Company Mission, Vision, and Other Guiding Stars
Kroger is a company that is dedicated and committed to excellence in customer satisfaction and customer experience (Kroger Co., 2017c). Kroger’s mission statement: “Our mission is to be a leader in the distribution and merchandising of food, health, personal care, and related consumable products and services. By achieving this objective, we will satisfy our responsibilities to shareowners, associates, customers, suppliers, and the communities we serve” (Kroger Co., 2017c). This mission very effectively and powerfully guides Kroger as an organization. The reason is mostly because this mission statement is in alignment with three business principals that Kroger has, which are to provide their customers with great products at good prices and a shopping experience that makes them want to return, to be a preferred employer where every associate feels valued and customers recognize that our people are great, and to achieve success for shareholders, help the environment, and serve our communities (Kroger Co., 2017a). Lastly, Kroger’s six core values in addition to its principals as a company are what make its mission statement powerfully and effectively guide the organization. The core values are honesty, integrity, respect, diversity, safety and inclusion (Kroger Co., 2016a). These characteristics about Kroger are impactful towards the success of the company achieving its goals and maximizing the effectiveness of its current and future strategies. Kroger has done a great job of adapting with growing concerns of its customers and the general public. They are aware that people want to shop at stores that care about the environment. Kroger has continued to do well because it recognizes the needs and feelings of its consumers, while still managing to offer excellent products at affordable prices. With Kroger’s admirable goals for sustainability and ensuring nobody goes hungry, they will continue to do well so long as they achieve those goals and keep their promises.
Kroger’s vision is, “Kroger’s vision for the future is to operate several formats within the same market, making it convenient for a Customer to shop one of our stores in-person or online for delivery, or pick-up, whether for dinner tonight or for all their shopping needs for the week. We will continue to reward our loyal Customers for doing this†(Kroger Co., 2016a). I believe this vision effectively and powerfully guides the organization. However, I do think it needs to be adjusted in order for improvement. The concept of groceries or products being available for delivery is not something that is guaranteed to be popular forever. Kroger needs to readjust this vision and instead focus on the idea of grocery pick-up being as fresh and quick as possible, while also ensuring to pick exactly what type of fruit or vegetable the consumer is specifying. This is still a powerful and effective vision for guiding the organization. It demonstrates to faculty and customers where the company is headed, and how they intend to maximize the customer experience. This powerful vision could potentially motivate employees to provide their highest level of customer service. The vision statement could also keep customers involved for what changes are to come at Kroger in the future.
Kroger is largely successful in offering excellent customer service and offering high quality products. Providing quality, healthy, and sustainable products that are affordable and readily available is likely to result in a large reason why Kroger is a leader in the grocery industry. Continuing with this strategy is an extremely effective and powerful guide for the organization. This is already what Kroger does, and by making adjustments and perfecting this strategy, the company has the power to grow larger and more profitable than it is currently. Some of these adjustments include offering more competitive pricing. Others involve more availability of the most popular products that are sold out the quickest. It is never too late to make adjustments to strategies or visions within an organization. It is better late than never to reflect on the current status of your company’s situation, and thinking about what changes can be made to make major improvements.
External Environment Assessment
There are many economic, sociocultural, demographic, natural environment, political, legal and regulatory, and technological currents, trends, and forces that are currently, and will, in the future, impacting Kroger as an organization. There are also many opportunities and threats that the organization faces, but as long as these threats are strategically dismissed or defended against by utilizing the current strengths and opportunities that Kroger has, then the company will become stronger.
External Currents, Trends, and Forces
Within Kroger’s sociocultural environment, pressure from various activist groups can paint a negative image of the company for not abiding by society’s growing trend of equality, environmental rights, gun control, and other movements in our society (Kroger Co., 2017b). If Kroger doesn’t “play the part†and join or support these movements, society views Kroger as automatically being “against†these movements and therefore in support of the opposing side. Media can twist the words or statements released by companies such as Kroger, which will have a negative impact on the company and make them lose a lot of business and trust from current and potential future customers (BusinessTeacher, 2017). In regard to the organization’s technological environment, the primary concern here is a cyber attack of some sort that could result in a breach of data or a loss of it completely. The biggest impact would be on Kroger’s grocery retail end. A lot of shoppers today make use of e-commerce technology to order their groceries online, pull up at their local Kroger store, and have employees load their full order into the back of the customer’s vehicle. This idea is fairly new and is incredibly smart, but without this technological capability, Kroger would have a tremendous impact on their grocery sales. Perhaps also customers’ information could be breached and stolen (credit card information). This could have a devastating impact on Kroger if they have to reimburse customers for their losses, and lose thousands of customers as a result of the breach (BusinessTeacher, 2017). There also exist legal and regulatory environment trends, currents, and forces that can impact the organization. There are two factors to this. First, Kroger is dedicated to protecting the environment, so they say (Kroger Co., 2017b). But because commercial stores like Kroger take up so much acreage, a great amount of deforestation must often occur to build a new location somewhere (Watkins, 2017b). The affect on environmentalist groups is that the pressure increases on Kroger to care more for the environment, or face backlash from these communities and hurt Kroger’s reputation. On the environmental scale, ordinary (and devastating) environmental factors across the globe or the nation can possibly affect the supply chain dynamics of Kroger receiving its good to stock the store with. A major storm or some type of global power outage could cause a delay or put an entire halt to Kroger’s ability to ship and receive goods. It is possible that in this scenario, Kroger could run its shelves dry and be out of stock for a long time or indefinitely, which could ultimately lead to the store shutting down nationwide (BusinessTeacher, 2017).
Competitive Analysis
There are a few key points that differentiate Kroger from its competition. Perhaps Kroger stores are strategically located closer to a certain demographic of customers that they know are likely to shop at their stores. However, there are some actual data-driven facts that backup Williamson’s theory. Every store has key components that make it different from its competition. Whether intentional or not, these components exist and are the very reason multiple stores exist within a single industry. People will go where they are used to going, and where they are most comfortable being, even if that means higher prices or farther driving distance (Weisbaum, 2014). I believe (and backed up with research) that Kroger has two main reasons that make its customers want to keep coming back. First, they have a humongous line of private-label products (Peterson & Lutz, 2015). The result is they can offer even more products at lower prices, drawing in a great amount of customers. In fact, over an entire quarter of total sales is due to purchases of Kroger’s private label products (Peterson & Lutz, 2015). The second biggest SCA Kroger has to offer is its customer loyalty program. The Kroger Plus Card is the highest rated customer loyalty program in the entire grocery industry (Peterson & Lutz, 2015). It offers discounts on groceries, gas at Kroger gas stations and Shell gas stations, as well as a well-designed app for phones that keeps tracks of points earned. The app and the rewards program inadvertently allow Kroger to spot trends with its customers and tailor products and services around its customers needs (Peterson & Lutz, 2015). New threats and entrants in the industry are a constant threat every business faces in the world. That is why Kroger must remain creative and unique to their competitors to stay on top in terms of sales and popularity. Kroger has an advantage to compete more effectively and add value to its chain by improving its integration with its trade partners. In 2004, Kroger partnered with business integration leader Sterling Commerce to help improve Kroger’s functionality with customer support, receiving transaction data, and end-to-end audits and controls (MH&L, 2004). Sterling Commerce offers network technologies that greatly increase Kroger’s ability to improve and tighten down on its supply chain collaboration (MH&L, 2004). This helps Kroger remove any unnecessary costs and increase the overall chain of supply process. Kroger can conduct business with more cost-efficiency and effectiveness (MH&L, 2004).
Conclusion: Opportunities and Threats
The opportunities for Kroger’s future and growth are plentiful. Kroger can use technology to analyzing wait times in lines. Done with video cameras, analyzing and gathering data of customer placement in line, where they come from and when within the store, and tracking what they are purchasing (such as what type of meat in a deli line, what selection takes the longest?), are all effective metrics for learning more about the customer. It can allow for Kroger to increase efficiency and decrease customer wait time. Another opportunity could be that Kroger can utilize technology further by looking into drone technology to deliver groceries. Kroger can find out what their competition is lacking in this regard and attempt to fix these problems (late deliveries, wrong address, not being able to exceed a certain weight of delivery, etc.). Finding another company’s flaws and weaknesses can be an opportunity for growth for another company. Kroger also offers a mobile phone application. This app should be re-designed to better cater to customers’ shopping habits, such as the technology behind Amazon and how it recommends certain purchases based on previous shopping behavior. Lastly, there is a technology that Kroger wants to introduce which will offer and remind customers about certain deals as they’re walking through the aisle (Nash, 2017). The customer’s mobile app will sync with in-store prices. The idea is that, as the customer is walking down the aisle, their mobile app will be able to detect where they are located within the store and spot and alert the customer of the best deals within that aisle (Nash, 2017).
As with every organization, there exist internal and external threats that can be harmful to a company if they aren’t addressed and strategies put in place to defend against these threats. First, there is increased desire from consumers for organic products (Huffington Post, 2011). Online campaigns can possibly hurt Kroger. Kroger’s online presence isn’t large enough. They are trying to implement more technology in their stores, but they just aren’t a large player in the online and e-commerce world. Kroger prides itself on value (Watkins, 2017). However, it might have to compete on price more than it wants to. Kroger will have to find a way to lower its prices and still make a profit, as it ultimately comes down to price. “Pricing is what drives traffic†(Watkins, 2017). Lastly, Kroger should invest its money differently. The organization needs to shift its focus from investing in technology, to investing in lowering prices. Maybe they need to invest in growing their own natural organic produce. They have put so much money into technology, meanwhile their competition has been slashing prices and driving more traffic to their stores instead (Mackie, 2017).
Internal Environment Assessment
Kroger has many tangible and intangible resources that perform towards the success of the organization and its current strategies. These resources are rated in terms of inimitability, durability, apporpriability, and sustainability. This includes financial, structural, and cultural resources that make up Kroger as the organization it is today. These resources are allocated and utilized in ways that help serve current strategies and prepare for embracing new strategies.
Core Competencies
Kroger has a large variety of products. Kroger’s competitors also offer a large variety of products. Kroger has an advantage over its competitors by offering many name-brand products that may not be offered elsewhere or at the same price. Kroger has always offered a wide variety of products, so they will need to continue providing more choices to stay durable in this aspect. A wide variety of products give Kroger high appropriability because it gives customers the choice and freedom of being able to find everything they need in one single store. The sustainability offered by having a variety of products is there, as long as Kroger can keep its customers happy by providing what consumers desire without them having an incentive to go elsewhere. Second, Kroger offers online ordering and curbside grocery pickup. The inimitability is low because this service isn’t new. Competitors such as Wal-Mart offer curbside pickup. The durability is medium because some consumers may enjoy the convenience of ordering online and only having to drive to the store instead of going inside it. Other customers might still prefer shopping inside the store, however. The appropriability is low because Kroger needs a larger online presence and awareness to boost its sales in this area. The idea should be to capture new customers outside of Kroger’s already-existing customer base and those who already use the Kroger Mobile App. The sustainability of online and curbside grocery shopping is medium, because if Kroger chooses to more heavily advertise Kroger ClickList and their mobile device app, then there is a chance that the organization can expand its service in this area as well. Lastly, there are Kroger fuel stations. The inimitability is high because many consumers are driving by gas stations in order to fill up at their favorite Kroger location (Weisbaum, 2017). The durability is high because Kroger is voted as the number one spot to fill up for gas among its grocery competitors and other fuel stations (Weisbaum, 2017). The appropriability is high because people will fill up at Kroger either before or after their grocery shopping experience, since the gas station is connected to the same plaza as the store itself, it creates further convenience for the consumer to fill up in the same trip. The sustainability is high because the convenience factor wins over consumers compared to competition. The convenience of the Kroger stores eliminates the need for consumers to travel or shop elsewhere.
Kroger operates on a low cost structure, and It offers a high volume of products at low prices to still generate a good amount of returns (La Monica, 2017a). Kroger’s competitors, however, such as Costco, Wal-Mart, and Amazon offer groceries at prices even cheaper than Kroger, which may hurt them in the future (La Monica, 2017b). The structures in these organizations can afford to sell their groceries for less because they are getting them supplied for cheaper and have less overhead (La Monica, 2017a). This indicates strengths on Kroger’s part, that they have grown as large as they are today with their current cost structure, but it also represents weaknesses because it shows what their competition is taking advantage of and where Kroger is missing out on lost profits.
Kroger’s organizational structure is functional (The Official Board, 2017). Information flows vertically from top to bottom. Kroger has 85 executives and 3 subsidiaries (84.51, Fred Meyer, Harris Teeter (The Official Board, 2017). The board consists of senior management (Chairman of the Board, CEO, directors). These individuals direct the company towards success while ensuring to satisfy shareholders of the company. Then, there are senior executives (CFO, presidents of retail divisions). These individuals are collectively responsible for meeting financial goals and objectives. They direct a division’s activities and policies. Lastly are those in charge of each individual retail-operating unit.
Financial Situation
In terms of Kroger’s financials, the most significant ratios are the percentage of gross margin sales, and the ten-year average of net income percentage. These two important key ratios provide vision of the future growth or lack of growth possibly ahead for the company. Kroger’s gross margin of sales has decreased from 23.43% in January of 2008, to 22.04% in January of 2017 (Morningstar, 2017). This may not seem like a lot, but the most important follow-up ratio to this is the company’s 10-year average of net income percentage. In January of 2008, Kroger’s net income over a 10-year average was 11.01%. Now, as of January of 2017, it is nearly half of that at 5.88% (Morningstar, 2017). I think this shows Kroger’s weakness, that it’s losing less money to be able to spend on production or new technology, and that it’s overall sales have decreased in the last decade. Less capital will make it more difficult for the company to keep up with increasing technology and new methods of delivery of products to the consumer. Or, if another health trend becomes popular, the concern is if or how heavily Kroger will be able to pick up on that trend and provide it to its consumers at competitive prices, and to deliver on that trend quickly. From a study of Kroger’s financial statements, a good strategy they can implement would be reducing inventory assets. Kroger had $6.5 million in inventory assets as of January 2017 (Nasdaq, 2017). Perhaps Kroger should try just-in-time inventory systems, to reduce the number of products purchased and stored in the back rooms. Plus, it might appeal to customers who like the idea of truly fresh-arrival products.
Capacity to Change
The organization is change-ready. A few small changes have the power to make a great amount of change within an organization. With Kroger’s plans of freeing up cash flow and reallocating that money into new strategies (Schultz, 2017), a reinvestment in capital and resources may be exactly what Kroger needs to plan and implement a new strategy. The large amount of convenience offered by Kroger stores in combination with the high reputation of the organization will make any changes involved with implementing a new strategy fairly easy. This is because Kroger’s current culture and values align with the strategy I am recommending in this case study.
Conclusion: Strengths and Weaknesses
The major strength Kroger has is its high customer loyalty, and its major weakness is that its prices aren’t the most competitive (La Monica, 2017). Because Kroger has such high customer loyalty, it should seek to lower its prices to better serve its existing customers and to attract new ones.
Strategies in Action at Kroger
Kroger has many current and long-term strategies, many of which revolve around the sustainability of the organization and its environmental impact (Kroger Co., 2017c). They have many goals that they aspire to accomplish by 2020 and 2025, including environmental long-term objectives and waste-reduction programs (Kroger Co., 2017a). Kroger’s only real publicly known strategy is its Customer 1st program, but the long-term goals currently at Kroger are goals of sustainability (Kroger Co., 2017a). In general, however, Kroger does have long-term goals in relation to its current mission and vision statements. Kroger focuses on making a difference for its customers, communities, and employees, by means of minimizing its impact on the environment, improving the economy from its presence, and being a part of the communities it serves (Kroger Co., 2017a). In addition to these goals, Kroger’s #1 corporate social responsibility is to fight hunger. Lastly, Kroger strives to build a lifetime of customers, and for its multitude of brands to be the main reason customers continue shopping at Kroger (Kroger Co., 2017c).
The chairman and CEO of Kroger announced in 2017 that a new strategy, the Restock Kroger Plan, was under way that would free up cash flow, a strategy that is primarily fueled by capital investments and cost savings (Schultz, 2017). This new strategy will develop new partnerships between Kroger and other companies. It will use its current capital to fund future technological capabilities and trends to create further streams of revenue. Kroger is strongly focusing on its ability to use technology to identify customer trends and traffic, so that artificial intelligence will enhance the customer experience (Schultz, 2017). The Restock Kroger Plan has given Kroger the goal of increasing its operating margin by generating $400 million by year 2020, and that it will double its free cash flow over the next three years with a goal of over $4 billion (Schultz, 2017). To achieve these goals, the chairman announced it will begin by slowing store development and instead focusing on increasing revenues from its current locations, citing that Kroger would slash capital spending for store projects (Hamstra, 2017).
With an accelerating economy, Kroger intends to keep up with competition by focusing on what it already has and improving it. The company is aware of its competition’s concepts of delivering food to customers’ doorsteps, but Kroger’s focus and strategy is on keeping fresh food the focus, something e-commerce competitors have difficulty achieving. Kroger’s focus remains on offering perishables, private-labels, and prepared foods (Hamstra, 2017). Based on these findings, I conclude that Kroger’s strategy is to compete with its competitors, e-commerce and retail, by focusing on enhancing the customer experience in-store, while offering the freshest food that is highest in demand, in comparison to its competitors. I believe Kroger’s strategy is that they believe customers enjoy an in-store grocery shopping experience because nothing offered elsewhere can truly be as fresh as getting groceries directly from the store, with no waiting period. Kroger’s decision-making is demonstrating a pattern of pursuing a retrenchment strategy, with plans of possibly selling its 784-store chain of convenience stores in order to boost profits over $400 million by 2020 (Monk, 2017). Slowing its role in expanding growth and instead focusing on its current boxes is also a sign of Kroger hammering down and cutting capital expenses on its plans for the future as an organization. Since the announcement of the Restock Kroger Plan, CEO Rodney McMullen has only reaffirmed its projected sales and profit outlook for 2017, rather than increase it. This shows that those in charge of the company have a more realistic approach of where the company is headed and what its strategy needs to be. This strategy has always remained generally the same – focusing relentlessly on customer needs – but now Kroger is doubling-down on this strategy with the cutting of costs for expansion and keeping its focus on maintaining and expanding its current customer base (Monk, 2017).
The results of Kroger’s strategies are working slowly but surely. Competition only seems to be crushing Kroger due to recent earnings reports and the many articles circulating about Kroger’s potential for a serious downturn. While these negativities may seem like Kroger’s efforts aren’t working, the truth is that the organization has seen optimism from its investors since its most recent annual conference. Shares went up 4% to $21.35 in pre-market trading since Kroger’s announcement of the Restock Kroger Plan, the possibility of selling off its convenience stores, and its smart-pricing strategies to beat competitors who steal customers on low costs (Monk, 2017). It’s difficult to say this early on, but Kroger is projected to achieve its goals and increase its profitability. However, stating specifically how much is questionable at this time, especially since Kroger has only reaffirmed its projected sales and profit outlook for the future, instead of increasing it at this time (Monk, 2017). The company is not increasing its capacities in terms of scale or growth of expansion of its stores, but it is increasing its internal strengths by not promising investors more than it is capable of achieving (Schultz, 2017). The very fact that it has refined its strategies over the last couple of years is a strong indicator that the organization is attempting to and successfully reducing its weaknesses (cutting capital spending, focusing on its current stores, focusing on boosting profits by selling off its convenience stores) in order to reach its goals of maximizing its current strategies.
The strategies of the organization clearly utilize Kroger’s core competencies by continuously putting the customer first, but not so much its differentness in the market. The current economic trend and desire by consumers in the grocery industry is for fresh food, available immediately (Huffington Post, 2011). Kroger may possibly differentiate itself from its competitors by sticking to its plan to offer what consumers desire by making it available in-store, which presents the opportunity for its products to be as fresh as possible in comparison to delivery of groceries, which isn’t nearly as fresh. Kroger can differentiate from its competitors by putting its focus on its customers, and not just on slashing prices. However, the organization must progress in a direction that achieves both customer satisfaction and sustainability in the marketplace by continuing to offer superior products at or better than competitor prices.
Strategy Analysis and Choice
One thing is clear about Kroger right now – its current and future strategy is putting the customer first (Kroger Co., 2016a). The organization’s focus on its customers and what their wants and needs are is what will allow Kroger to stay competitive within its industry. Because of Kroger’s already well-established popularity and credibility, any strategies they implement moving forward should be formulated and executed carefully as it could work either very well or backfire on the company. No matter the strategy, as long as Kroger can formulate one that continues to focus on putting the customer’s needs first, it should get positive reception.
Strategic Alternatives
One way that Kroger can differentiate itself is by offering as many products as possible that are more affordable than all of its competitors. Offering superior products that are inexpensive will give Kroger an advantage over its competition. Also, being a large grocery company as popular as Kroger and offering such great deals is a trait that will likely stand out to consumers and offer the company the advantage of added credibility as well. Another strategy Kroger should focus on can be additional training on all staff so that Kroger employees are more helpful and knowledgeable than competing grocery stores’ faculty. Having a smart staff that is always available to help and knows the answers to customers’ questions can possibly make the difference as to why consumers choose where they shop. These are only a couple ideas that are realistic and doable for getting Kroger where it is now to where it can be and needs to be in the future in order to compete and stay relevant.
These goals by no means will reinvent the structure or culture of the organization, but they should provide insight as to the potential that Kroger has. In the following SWOT analysis, Kroger can take advantage of its strengths, weaknesses, opportunities, and threats, by turning them around and finding the hidden benefits behind their weaknesses, for example. Or, the organization may find that a combination of its certain strengths and threats could be a formula for the best strategy the company has moving forward. These can create for large factors that contribute to strong strategies, which may lead to many reasons why people will continue shopping at Kroger.
Kroger’s strengths currently are that they offer a wide variety of products, they are already a reputable grocery chain, and their employee satisfaction levels are high (Watkins, 2017a). They also offer gas stations and convenience stores at many locations. Kroger’s current weaknesses are that they have a low cost structure, they don’t offer any type of delivery of groceries, and their natural and organic products are still costly compared to competitors (Watkins, 2017a). Kroger’s current opportunities are they have the opportunity to expand their availability and pricing of organic products, they have the chance to begin offering delivery of groceries rather than just curbside pickup, and they have a great amount of customer loyalty. The organization’s current threats are competitors in the e-commerce world, such as Amazon. Also, organic competitors with lower prices are a threat to Kroger as well if they can’t price match competition. Lastly, the threat exists that there is possibly a shrinking need to shop in store; rather, consumers may one day decide to shop entirely online or have it delivered to their homes.
The most impactful strategies to be developed come from a combination of some of these traits of the organization. For example, the combination of strengths and threats, or weaknesses and opportunities, could enable Kroger to fix or alleviate every problem within its SWOT analysis. In combining the strengths and opportunities, there exist a few strategies. If we combine Kroger’s high employee satisfaction with its high customer loyalty, these two traits can make Kroger an even more favorable and reputable company than it is right now. If we combine Kroger’s wide variety of products with the possibility of delivering groceries, Kroger can penetrate a whole new demographic of providing to consumers who choose to shop from at home (and stay at home). Some interesting strategies arise when we combine weaknesses and opportunities. If we take Kroger’s weakness in its lack of providing grocery delivery, and combine it with the expansion of organic products across all Kroger stores, this opportunity may actually trump the weakness. Consumers may be willing to purchase organic products in store only, and thus remove the need or want or grocery delivery. If we take the weakness of Kroger’s organic products coming with a high price, and the opportunity of Kroger’s high customer loyalty, there is a chance that the high customer loyalty will outweigh the high price, and that maybe customers will be willing to pay more at their favorite grocery store. The possible strategies developed from the strength and threat combinations, and the weaknesses and threats combinations, have the potential to be the most powerful and effective. Combining the strengths of a wide variety of products and a reputable company name, with the threat of competition such as e-commerce, arrives at the conclusion that perhaps e-commerce isn’t such a threat after all. In-store groceries will be in stock, and fresher than any groceries that can ever be ordered and delivered online. The strengths of Kroger offering gas stations and convenience stores, and the fact that it’s a reputable and well-known name, in combination with the threat of a possible shrinking need to shop in brick and mortar stores, may not be as real a threat as once considered. The reputability and convenience of Kroger will retain customers and maybe they won’t prefer shopping online. Lastly, the combination of weaknesses and threats can actually provide reason behind what Kroger should do to fix these problems. Taking the weakness of not offering grocery delivery and the threat of e-commerce competitors means that perhaps Kroger should start offering delivery of groceries. If competition becomes so harsh on Kroger that it starts losing money due to grocery delivery, then this is where they need to invest their time, money, and resources. If we take the weakness of costly natural and organic products, plus Kroger’s low-cost structure, and combine it with the threat of other competitors offering organic products at lower prices, then Kroger should seek a cheaper supplier to offer these products at lower prices.
Strategy Choice and Rationale
The SWOT analysis and the combination of these factors provide the greatest insight behind what Kroger needs to do to refine or implement existing and new strategies. The strongest combination discovered is the last one, being the joining of a threat and a weakness. Pulling together the lowest or most damaging points of an organization seems to have proven to be the most logical one for developing and recommending a strategy for the future of Kroger. Considering 58% of consumers prefer organic food over conventional products (Huffington Post, 2011), that is why I am recommending Kroger find a cheaper vendor within its supply chain so that the company has the ability to offer organic products at a cheaper price than any single other competitor. The competitive advantage to not only having the product that consumers are looking for the most, but also offering it at the cheapest price in the marketplace, will allow Kroger to become an unstoppable force in the grocery industry.
Strategy Implementation: Alignment
The organization only needs to make a few changes or adjustments to better align with its future strategies. The first adjustment that Kroger needs to make is that they need to forget or cancel the notion that the company will one day have the ability to deliver groceries. This is only a trend and will not be popular forever (Huffington Post, 2011). Kroger’s strategy moving forward should be to focus on providing the freshest, most natural, high quality groceries at the cheapest prices amongst all other grocery stores. While competitors will be focusing on the concept of grocery delivery and providing groceries in an e-commerce channel, Kroger can invest its money and time into enhancing this strategy and its overall customer experience.