Analysis of Industry Attractiveness
The analysis of the case study using Porter’s five forces shows that the industry is very attractive and profitable. According to Pervan et al., analysis of external forces of an organization directs the modification of strategic processes and innovation of new dimensions for sustained growth (12). In the grocery industry, the threat of new entrants is significantly high because the establishment of a grocery store has no substantial barriers.
Lack of product patents, low capital requirement, and the absolute lack of switching cost provide opportunities for new entrants to meet the daily needs of diverse groups of consumers. Conversely, high returns gained from the ready market and low-overhead costs make the industry a profitable venture and attractive for new players. The accessibility of processed products with long shelve-life causes a threat of substitutes to perishable products in the market.
However, impacted by lifestyle, the global initiative for health promotion with the use of natural and fresh products creates a market for the grocery businesses, leading to the establishment of opportunities and increased profitability of the grocery industry. The availability of information in the market has enhanced the ability of consumers to make informed purchasing decisions that shape the profitability of businesses (Pervan et al. 7). Consumer awareness of healthy lifestyle behaviors and responsible business activities make the bargaining power of buyers high in the grocery industry.
The industry experiences low purchasing power because the supplier population is large. The demand for quality products in the industry is less skill-based and easily achievable. This market element significantly reduces the influence of suppliers on product pricing, which provides an opportunity for industry firms to engage in competitive low-cost strategies while still making profits, resulting in the attractiveness of the industry.
The presence of a high number of retail players creates an intense rivalry in the industry (Yu et al. 5). Since most of these retail firms enjoy economies of scale and high-capital strength, they adopt competitive strategies that involve low product pricing to win a large market share. The existence of intense competition owing to product pricing negatively affects profitability and the attractiveness of the industry.
Analysis of Internal Activities Using Porter’s Value Chain
The internal analysis of the company shows that Trader Joe’s has developed effective processes that are significant in promoting the organization’s profitability through increased sales and reduction of total overhead. The maintenance of synergistic processes is essential in creating efficiency and satisfaction, which are key success factors for the growth of an organization (Yu et al. 16). The analysis of the case study shows that inbound and outbound logistics integrate effectively and provide optimal outcomes. In outbound logistics, Trader Joe’s has adopted a continuous shelve management process that involves daytime restocking and order of stock.
Continuous stocking of products ensures that the company meets consumer needs during peak and off-peak seasons, thus, optimizing the performance in the competitive industry. Since the company values involve the maintenance of a customer-centric business model, the certainty of the continuous availability of stock labels the company as a caring and responsible partner in the market.
This strategy has positively influenced customer satisfaction, leading to a competitive advantage over rivals. In the aspect of infrastructure, Trader Joe’s has maintained good customer service involving friendly employee behavior and non-check-out scanning procedures. Consequently, the company’s low-cost approach and acknowledgment of returned goods that do not meet customer satisfaction build a brand of responsibility among clients. This friendly atmosphere breaks consumer resistance, creates trust, and makes it easy for the organization to launch a new product in the market.
The analysis of human resources indicates that the company’s recruitment process involves the identification and development of friendly staff cultures. Organizational culture is critical in the delivery of standard services, which meet consumer needs and bring about satisfaction (Yu et al. 9).
From the case study, it is evident that Trader Joe’s trains its employees to gain sufficient knowledge of all products and activities within the organization. Informed employees provided quality services that boost the brand of the company and enable it to expand its market share in the competitive industry. In addition, the company gives employees funds to acquire and test products. This management strategy builds confidence among employees to promote products, resulting in increased sales, improved service experience, and reduced costs.
Analysis Using Porter’s Generic Competitive Strategies
Trader Joe’s has adopted a focused business strategy in creating a competitive advantage over rival companies. The focused business strategy is in the narrow aspect of the competitive scope, which centers on cost and differentiation strategies. As the company focuses on meeting the market demands of the growing and financially challenged educated population, it applies cost focus in penetrating and dominating the market. Additionally, Trader Joe’s constructed its stores in the proximity of learning institutions with the objective to provide affordable quality products. In this view, the company employs a differentiation focus in identifying and targeting learning institutions.
Since consumers are price-sensitive, Trader Joe’s employs a low-cost approach as a competitive strategy that puts the company in an advantageous position over its rivals. The company maintains low overhead costs through the establishment of small units, a narrow product line, low employee turn offer, and in-house advertising approaches involving its staff. The reduction of expenses makes it possible for the company to engage in low product pricing without incurring losses, making it difficult for other players to impose a noticeable rivalry.
Founded along with a target market, Trader Joe’s has continually reviewed and refined its customer service lines to be in tandem with friendly experiences, which offer classy customer care services. The significant services include avoiding scanning procedures for customers in its outlets, assisting customers in locating items by employees, restocking shelves in a real-time manner, paying employees well, and accepting goods returned by consumers.
These approaches appeal to sensitive consumers and create lasting friendly experiences, which make Trader Joe’s a preferred retail organization. The company undertakes corporate social responsibility and performs sustainable business activities, which entails recruitment of its staff from the local market and provision of fresh and natural products. According to Lev, an organization’s involvement in community activities is essential in creating a strong brand and acts as a penetration strategy to new markets (71). In line with sustainable measures, this business approach has a positive impact for it portrays Trader Joe’s as a responsible organization with social interest beyond just profitability and puts the company in a more competitive position than its rivals.
Trader Joe’s has not involved itself in online marketing and sales activities, yet consumers are adopting online social behaviors. The adoption of advanced technological processes is essential for it enables organizations to maintain leadership in innovation significant for sustained growth due to the dynamic consumer demands (Lev 70). Therefore, to understand, control, and keep abreast with the needs of this particular new market, Trader Joe’s must adopt a flexible business culture that applies technology in selling and marketing. The strategy involves consistent online presence to ensure tracking of the volatile market features, management of consumer requests, and feedbacks.
Additionally, since consumers may wish to accomplish their daily tasks from a click of a button, the absence of an online sales unit highlights the organization’s weakness critical in enhancing the competitiveness of rival firms that engage in the door-to-door delivery of products to customers such as Amazon. The significance of this recommendation is evident from the large social media fan pages, as highlighted in the case study. Therefore, the company must create its online presence to maintain its extensive customer service experience, sustain brand loyalty, conduct market research, and adopt the door-to-door delivery system to keep up with the changing consumer demands for sustainable growth.
Lev, Baruch. “Evaluating Sustainable Competitive Advantage.” Journal of Applied Corporate Finance, vol. 29, no. 2, 2017, pp. 70-75.
Pervan, Maja, et al. “The Influence of Industry Characteristics and Dynamic Capabilities on Firms’ Profitability.” International Journal of Financial Studies, vol. 6, no. 4, 2017, pp. 1-19.
Yu, Qionglei, et al. “Enhancing Firm Performance Through Internal Market Orientation and Employee Organizational Commitment.” The International Journal of Human Resource Management, vol. 1, no. 1, 2017, pp. 1-24.