The environment of business today, is controlled by some many factors. One of the major factors is globalization, which according to Ristovska and Ristovska (2014) provides opportunities for business success potentials and at the same time presents risk potentials in a highly competitive business place.
Overview of Company
Trader Joe’s was founded by Joe Coulombe in 1967 in California United States of America. The company’s main business is in the retail line of enterprise. The target market according to the founder, was cater for the needs educated customers in the California area of the United States. Though, the company has kept a close lid on its financials over the years, however, Trader Joe’s is known to have about 414 store locations across the United States (Trader Joe’s, 2013). OtherKroger, Safeway and Supervalu on the high-end amongst others (Progressive Grocer, 2013). And due to the localized operations of Trader Joe’s only in the United States, it is safe to say that the retailer operates within the national sphere of business. However, speaking from ownership (Acquisition by Aldi) point of view, Trader Joe’s can be termed as international.
PESTEL analysis
With the turn of events in the global economy, countries are re-evaluating their dynamics leading to economic prosperity in every way. The political system in the United States has been described by Moss (2012) as lacking effectiveness and impacting negatively on the competitive position of the country. However, the country has been known to sustain democratic values that aids peaceful co-existence of diversity. This in its own way has encouraged business pursuits many decades now. The economic conditions in the United States on the other hand has seen dramatic acceleration in the area of productivity, which is key to enhancing business activities in the country (Jorgensen, 2004). Also, the policy thrust of the government has given opportunities to businesses through many incentives that encourage entrepreneurial skills. The continued survival of Trader Joe’s has been linked to the consistence in economic policy formation that allows businesses to strategize and to focus on their areas of business without negative impacts from rusty economic policies. Moreso, the successes of businesses like Trade Joe’s, has been hinged on their compliance to technological inclusion in their performance processes. However, Trader Joe’s has recorded lack of enthusiasm for the implementation of increasing information and communication technology in its operational culture (Ager and Roberto, 2014). The United States through policy formation is known to be one of the nations with strong drive in fusing technology as a powerful driver of business. Global movement towards environmental and legal compliance in the US has been exemplary, in that the laws and regulations of the country is consistent adherence to aspects such as tax laws; and customers are starting to show more interest in organic foods and methods of packaging as consistent with gradual compliance to environmentally friendly business operations (Schmitz, 2012; Ristovska and Ristovska, 2014).
Five Forces analysis
Trader Joe’s position in the retail industry (Foods), may be found at the bottom of the pack according to Progressive Grocer (2012).the reason for this is not far-fetched. The industry in the United States is highly competitive with leaders like Wall-Mart. The ease of entry becomes very challenging with other strong competitor ahead with many store locations and different formats in operations in the US. Trader Joe’s target market for the educated, keeps it in form and control without the need to spread out in competition as others do.
As explained in the case Trader Joe’s operate the low cost strategy. This is enabled by its understanding with suppliers that are not easily known by competitors. The supplier pressure is low on Trader Joe’s. So, they are able to deliver low cost and still make profits that keeps them going.
Buyers’ power in the context of Trader Joe’s and according to Dalken (2014) has been neutralized by the low cost strategy of the retailer and the relationship they maintain with their educated customer target. The essence buyer power is to push price downwards. However, the relationship that Trader Joe’s keeps with its suppliers, enables them to neutralize the negative effects buyer power would have had.
Threat of substitutes in the retail industry in the US is very high speaking from the list delivered by Ager and Roberto (2014). However, Trade Joe’s has been able to overcome this by remaining true to its vision of providing for the educated target market around education centers. The customers of Trader Joe’s know and understand the company. This has been able to reduce the impacts of threat of substitutes.
Trader Joe’s also has chosen a path for itself in the industry in the US. The retail has shun what they call ‘unnecessary competition. They have kept to their traditional and functional processes and methods which brings their customers closer to them. For instance, in the aspect of marketing communication, they have kept to their fliers, little radio ads, and have depended on the word of mouth strategy. Their growth may not be like those of the big names. However, they have been able to grow and remain profitable since inception.
Internal analysis using SWOT, VRIO, Value Chain, and capabilities and resources developed by company
Trader Joe’s strategy also wades into the effective management of its human resources. According to Ager and Roberto (2014), employees are paid well above the normal expectation for workers in the retail sector. This forms strength for the company, as these employees give their soul to the success of the business. The weakness of the retailer may be found in its insistence on its traditional ways of relating with its customers and not going for the big adverts, which Hanninen and Karjaluoto (2017) considers as a boost to business. The opportunities open to Trader Joe’s operations in may still be found in its target market across the United States. Accordingly its expansion shown in Trader Joe’s.com (2013), speaks of it taking these opportunities howbeit in a gradual stride.
In discussing the VRIO and Value Chain positions of the company, it is instructive to consider the necessity of the resource-based view of a firm, which Madhani (2010) observes allows a firm to strategize effectively with all its resources in such a way that that they are able to compete effectively and to gain levels of advantage to themselves. In Trader Joe’s, employees are giving the opportunity to deliver their best with the necessary push from management. In so doing, these employees are able to add more value in customer value chain (Madhani, 2010).
Part 2
Strategic Options for Growth
Trader Joe’s from day one has made clear that it is not in hurry for expansion. However, they take seriously the satisfaction of their customers. When we consider the need in a highly competitive business environment such as is obtained in the retail industry in the US, it behooves Trader Joe’s to make attempt at competing with the rest.
Trader Joe’s strategy of low cost has been applied in managing the educated target market that stands till date as their most important customer base. The application of Ansoff Matrix can be applied in furthering the growth possibilities of the retailer.
Source: Ansoff (1960).
Yin (2016) identified Ansoff Vector Matrix as the application for the analysis of markets and products. However, he argued that the application in contemporary business environment goes beyond into diversification development strategy, performance and enterprise technological capabilities. Trader Joe’s as a business concern indeed needs to expand its business in order to remain relevant in the business environment. According to Ager and Roberto (2014) Trader Joe’s business strategy has been hinged around its ability to achieve and deliver low cost to customers. This strategy can form the basis for expansion into other locations within and without the United States. Market penetration strategy is key to increasing market share in an already existing market, which can only be achieved through low cost of products delivered to customers (Wainaina and Oloko, 2015). Since the retailer thrive among the educated customer base, it becomes necessary for them scan educational centers in the US to find suitable locations for their business. The idea of low cost may not be the only case for successful growth campaign. This brings in the value of resource-based application in the addition of value in the overall process.
Product development area of Trader Joe’s should look at increased provision of organic foods, which become a growing point in consumers’ perspective all around the world. The retailer with its relationship with manufacturers and suppliers, and the understanding of their customers may go forward to develop new products that meets the needs of its target market. Since new and successful products contributes to the success of organizations (Bhuiyan, 2011), it is strategic for the retailer to look at giving its customers a new thrill of products that are cheap for their consumption pleasure. These new products can be tested in new markets that will be developed as the expansion continues.
True to its practice to stay with its customer base which consist of the educated class that needs good quality groceries at cheap prices, new markets can be developed following the same sequence. Samuel (2016) argued that sales can be increased by selling already existing products in new markets. This may be convenient for Trader Joe’s as they have found it a successful strategy in the past. Irrespective of competition, new market development for Trader Joe’s is aided with their consistent capacity in delivering low prices for their products.
In discussing diversification from Ansoff Vector Matrix perspective, Trader Joe’s performance in the grocery market may be saturated. The acquisition of Aldi has increased their capacity to give a measured attempt to unrelated diversification in the US market. However, to able to compete more effectively against leaders like Wall-Mart, Trader Joe’s need to consider expanding its foray in the retail sector of the US market in related diversification. Meijer (2015) argued that related diversification has proved to be more valuable to firms, as it works on already available skills which boost resource-based view of the firm, and delivers competitive advantage faster than unrelated diversification.
Though Trader Joe’s financials have been kept secret for the most of their existence, yet, their continued success shown by their effective human resource management, gradual expansion and increasing customer base, tell the story that they are healthy. The low cost strategy and the penchant to deliver quality to their customers, has generated unending loyalty from their customers. By implication their revenue keeps increasing. The profitability of the company can be deduced from their ability to sustain effective and efficient services to their customers, which leads to satisfied customer base.
Part 3
Strategic solution for company’s on-going health
It can be said that Trade Joe’s has been successful with its low cost strategy and target market. However, global pressures, the needs of customers and the challenge of competition sets the stage for Trader Joe’s under Aldi to take the giant step towards unrelated diversification. There are great support for related diversification any time for its benefits to firm’s quest for advantage. But, a gradual attempt at unrelated diversification with the required changes in skills and other resources, the retailer may begin to compete against others in some areas where the company has ignored in the past. Indeed, part of the essence of Ansoff Vector Matrix, is to look at products and markets that has been left unattended. According to Yamoah (2014) unrelated diversification can provide Trader Joe’s with cover for cyclical and seasonal variations, it opens up opportunities for new employees capabilities.
Asides this, Trader Joe’s should pursue more expansion in accordance with its traditional following with educational centers. This may be of great advantage as the United States is known as hub for educational institutions. Since the story of the retailer is already around US, the company should take advantage of their popularity to maximize their store presence around more states in the country. This is based on the call from their loyal customers to do so in their quest to satisfy them.
The increased application of marketing communication, which Kitchen and Burgmann (2010) argued is responsible for increased sales in many firms against their competition, should be considered in Trader Joe’s quest to stay competitive and to keep in good touch with its customer base. Its application of technology can also be considered as a form of increasing efficiency and effectiveness in the delivery of services to customers around the United States of America.
2018-7-15-1531671367