report on strategy and marketing V3.docx

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MBAGENERAL MANAGEMENT 2012/2013 IbragimovaFeruza Student Nr: 12843986 Tutors: Jane Priddis Jim McLoughlin International Strategy and MarketingMNM94 A strategic business and marketing review of a Morrison Plc LIVE CASE STUDY ASSIGNMENT 1 st submission/submission on referral/examination re-work/submission on extension (delete as appropriate Due date: 18th April 2013 Number of pages: Word count:

Transcript of report on strategy and marketing V3.docx

Page 1: report on strategy and marketing V3.docx

MBAGENERAL MANAGEMENT 2012/2013

IbragimovaFeruza

Student Nr: 12843986

Tutors: Jane Priddis Jim McLoughlin

International Strategy and MarketingMNM94

A strategic business and marketing review of a Morrison Plc

LIVE CASE STUDY ASSIGNMENT

1st submission/submission on referral/examination re-work/submission on extension

(delete as appropriate

Due date: 18th April 2013

Number of pages:

Word count:

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Table of Contents

Executive Summary...................................................................................................................3

1.0 Introduction..........................................................................................................................4

1.1 Background of WM Morrison..................................................................................4

2.0 Mission and objectives.........................................................................................................6

3.0 External analysis of Morrison..............................................................................................8

3.1 PESTEL analysis....................................................................................................10

3.2 Porter’s Five Forces Analysis................................................................................14

4.0 Internal analysis of Morrison.............................................................................................16

4.1 FinancialAnalysis of Morrison...............................................................................16

4.2 Value Chain Analysis.............................................................................................20

4.3 SWOT analysis.......................................................................................................21

4.4 Generic strategies...................................................................................................22

6.0 Recommendations for Future Objectives...........................................................................22

5.1 SMART Objectives................................................................................................22

5.2 Available Market Options......................................................................................23

5.3 Evaluation of Market Options................................................................................24

5.4Marketing strategy..................................................................................................26

5.4.1 Market segments......................................................................................................26

5.4.2 Targeting Segments.................................................................................................27

5.4.3 Positioning Strategy.................................................................................................27

5.4.4 Forecast....................................................................................................................28

6.0 Summary &Conclusion......................................................................................................28

References................................................................................................................................29

Appendices...............................................................................................................................33

Appendix A..................................................................................................................33

Appendix B..................................................................................................................34

Appendix C..................................................................................................................35

Appendix D..................................................................................................................36

Appendix E...................................................................................................................37

Appendix F...................................................................................................................38

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Executive Summary

WM Morrison is one of the big superstores in the UK who has more than 10% market share.

Morrison particularly deals in food items and its strategic mission is to secure a leadership

position in the UK retail sector. The environmental analysis of Morrison reveals that the

superstore is operating well and meeting all the requirements of stakeholders but in contrast,

it is facing some issues like;not utilisingmodern technology i.e. online retailing, not

enoughconvenience storesyet, UK dependency, or tight rivalry on the basis of food prices.

This report is about to formulate a marketing strategy for Morrison after evaluating the

market options available to it. In this paper, six market options are identified using Ansoff

Matrix and evaluated through Suitability, Acceptability, and Feasibility criteria. It is found

that at this time, organic growth and acquisition are the best market options for Morrison on

the basis available resources and potential benefits.

On the other hand, Morrison can segment the market on the basis of four segmentation

criteria such as value for money (price), convenience (location), freshness (quality), and

service (timely availability of food items). It is believed that following its core strengths,

Morrison can target segmented market by communicating its key strengths to the customers.

In this way, the market share could be increased up to 5% after three years and consequently

the sales will be increased up to 10%.

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1.0 Introduction

Developing a strong understanding of business and marketing strategy in an international

environment is very important for every business. The aim of this report is to create a

marketing strategy for Morrison and for this purpose, first the internal and external

environments of WM Morrison are reviewed in detail. Then recommendations for future

objectives are devised and evaluated using various tools and methods. Finally, a proper

marketing strategy is designed which is based on market segmentation, targeting, and

positioning.

1.1 Background of WM Morrison

In 1899 egg and butter merchant William Morrison began work to create the company which

is the UK’s fourth largest food retailer with over 400 stores we know today. From a stall in a

Bradford market came the inspiration to innovate and lead the way in supermarket retailing.

After moving from market stalls to counter service, progress is such that in 1958 a small

town-centre shop is opened.

"Victoria”, the company's first supermarket wasopened in Bradford in 1961 with 5,000 sqft of

retail space selling fresh meat, greengrocery with free parking available. Ongoing expansion

and plans for further growth lead the company to go public in 1967. In 1971 New Head

Office, warehouse and factory complex opened in Bradford.First acquisition made by

company in 1978 which was thetakeover of Whelan Stores, Morrison operates in Lancashire

for the first time. Following that in 1980 - the Farmers Boy purpose-built fresh food factory

begins trading as a wholly-owned subsidiary of Morrison.

In 1988, the first Morrison distribution centre, Wakefield 41 started operation and it has been

extended to include chilled storage and an ambient storage area for produce, as well as a

bread warehouse. In 1997, second distribution centre Gadbrook Park been opened in

Cheshire.In October 1998, Morrisonopenedits first store in the south of England in Erith,

Greater London and the following year company had already 100 stores across theUK. First

Welsh store opened at Rhyl in 2000 and company’s first store in Scotland openedin 2004

successfully at Kilmarnock.

Morrisonjoinedthe FTSE 100 for the first time in April 2001. In 2004 Morrison successfully

completedthe takeover of Safeway, creating the UK's fourth largest supermarket group. To

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serve the enlarged group, Morrisonacquired an additional fresh produce packhouse and

distribution centre at Thrapston in Northamptonshire. In 2005 Morrison acquired three bakery

factories from Rathbones, the same year company acquired Kepak Buchan, the Turriff-based

abattoir.

In 2005 Richard Pennycookjoinedthe Morrison Board as finance director.In November 2005,

Morrisoncompletedthe process of converting Safeway stores to the Morrison format, the

biggest retail conversion exercise ever undertaken in the UK.

Morrison since 2006 startedon petrol forecourts businesses as well.In September 2006

Morrisonwasawarded Seafood Retailer of the Year for itsdedicated and professional service

of in-store fishmongers, as well as having the best quality fresh seafood available. A new

advertising and branding campaign waslaunched, it reflectedthe fact, that Morrison makes

and prepares a wider range of fresh food in-store every day than any other supermarketin the

UK.In 2007 Morrisonopenedthe first of its smaller format stores at Erskine in Scotland.

Featuring the full range of Market Street fresh food, it provideda blueprint for future

expansion. Morrison introduced over 35 locally produced fresh foods into its stores across

North Yorkshire.

Morrison is the first supermarket to commit to selling 100% British fresh lamb throughout the

year in itsstores nationwide since 2007 and since 2008 Morrison offers 100% British meat.In

2008, Sir Ken Morrison retiredafter being honoured with an award for Outstanding

Contribution to Retail at the Retail Week Awards. There are currently more than 400

Morrison stores across the UK, welcoming around 9 million shoppers each week. The

company currently employs more than 114,000 members of staff in stores, factories, and

distribution centres and head office administration. (Morrisons, 2013a)

As a food specialist, Morrison differentiates itself from their major competitors, all of whom

have significant non-food offers. The superstore has unique own manufacturing and packing

facilities, and being farmers themselves. Morrison also prepares more food and employ more

specialist butchers, fishmongers and bakers in-store than its competitors. Company clearly

demonstrates deep understanding of food and ensures that everyone who shops with them

receives outstanding value, freshness and service.

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2.0 Mission and objectives

Grant (2005) argues that there are three concepts –all closely related and useful in helping

companies to think about their identity, their purpose, and the fundamental elements of their

strategy. These are values, mission and vision. Collins and Porras (1996) state that core

values must be complimented by core purpose – the organization’s most fundamental reason

for being (for example Walt Disney’s core purpose to make people happy). However, a vision

statement defines what the company wishes to become or where it seeks to go. A mission

statement is more statement of corporate purpose and often defines the area of business in

which it competes (Grant, 2005). According to Johnsonet al. (2008) mission is a general

expression of overall purpose of the organisation, which, ideally in line with the values and

expectations of major stakeholders and concerned with the scope and boundaries of the

organization.

Morrison vision is to become ‘the food specialist for everyone (Morrisons, 2013b).

Morrison’s vision supported by brand value and strategic objectives.Morrison has made

considerable progress in its strategy to position the business as the UK’s ‘food specialist for

everyone’

Morrisons defines ‘Food specialist’ as they really understand food and gives the following

reasons:

we know where it comes from;

we pack it and make it in our factories;

we make it in our stores; and

we employ craft skills in every store

Although ‘For everyone’ means that:

Great food which is also great value

Great food which is for every day not just special days(Morrisons,2013b,p6)

Lynch (2012) states that the mission of an organisation outlines the broad directions it should

and will follow and briefly summarises the reasoning and values that lie behind it.

Strategic objectives build on Morrison historic strength and Makethe Company unique in the

UK grocery market. They are: fresh in store preparation, moving from National to

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Nationwide, great selling and service to customers, keeping costs low to ensure prices are

competitive, vertical integration in the supply chain, and ensuring right product is always

available, great value across Morrison ranges(Morrisons,2013c).

According to Morrison official website,Morrison offers quality and freshness at a price

people like and the famous promotional offerssuch us Collect saver stamps, Get free voucher

for every £30 purchase, Morrisons fuel saver always save customers money. Morrisons do

not just offer value on the items – the prices are great value across the rangesas well.

Making great food, offering outstanding service and being more efficient are objectives in

Morrison’s strategy (Morrisons, 2013 d). In order better control freshness and quality of

products Morrisons been vertically integrated. Having their own manufacturing, packing

facilities and distribution network means that they can get food to the stores faster, so it is

always fresher.

Moving from National to Nationwide will make Morrison stores accessible to more people.

Organisation identified an opportunity for space growth so that more households in the UK

are within a 15 minute drive of one of the Morrison stores. This space growth started with the

acquisition of 38 stores from Co-operative/Somerfield in 2009 and this added 480.000 sq.

feet of space during the year. Group has acquired six HMV stores the music retailer’s

administrator, and 49 Blockbuster store across theUK. It has also acquired 7 former Jessops

shops, in order catch up with rivals i.e. Tesco and Sainsbury’s. Morrison planning rapidly

expands the Morrison M local store format; it will operate as convenience store (Just-Food,

2013).

According toMercer (2013) “Morrison offering its employees a GBP 500 ‘finder fee’ if they

find convenience properties for Morrison that are subsequently opened”.The target was

Morrison M convenient store format get into market quick.Group aims to have right product

always available for customers. Vertically integrated supply chain means to get food into

stores quickly in order to supply to customers their increasing choice and availability.

According to Johnsonet al. (2008) strategy is the direction and scope of an organisation over

the long term, which achieves advantage in changing environment through its configuration

of resources and competences with the aim of fulfilling stakeholder expectations. So, here

Morrison strategy from official web site states ‘Our strategy is to deliver sustainable, long

term growth, building on our traditional strengths of fresh food, quality, value and service,

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backed by our unique vertical integration capability, whilst reflecting our customers’ needs

and the changes that are taking place in the market. We will do this in a way that stays true to

the things that make us Morrison’.

Figure 1: Morrisons Brand value, objectives and vision

Source :( Morrison Annual Report, 2011)

In order to deliver the strategyMorrison defined its strategic priorities. They are: expansion

through new space and new channels.

Over recent years Morrison has extended its traditional presence in the North to South of the

country and now recognised as truly national brand. Despite this, there are still 6.8m who do

not have yet easy access to Morrison stores. (Morrison, 2012).

3.0 External analysis of Morrison

External analysis is important because it helps in developing sustainable competitive

advantage (Lynch, 2006). Environmental analysis includes everything and everyone outside

the organisation, like customers, competitors, suppliers, government and social institutes.

In order to understand and begin external analysis of Morrison, the author starts with market

definition and size, market growth and market share.

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Levitt (1960) states that ‘businesses will do better in the end if they concentrate on meeting

customers’ needs rather than on selling products’. Markets are described in terms of annual

sales; a ‘large’ market may be more attractive than ‘small’ market (Lynch, 2012)

When considered as a whole the grocery market in the United Kingdom is steadily

growing in size, being about 4% bigger today than it was a year ago; February 2013 update: 

12 weeks ended February 17, 2013 market growth rate picks up 3.2% -> 3.7% but still lags

general inflation (4.3%).Morrison's is growing slowly but surely, the company opened close

to 20 new stores in 2012 with most of those locations featuring a larger selection of

produce (Grocery News, 2013)

The UK grocery market was worth £163.2 billion in 2012, an increase of 3.8% on 2011

IGD forecast that the UK grocery market value will be worth £192.6bn in 2017, an 18.0%

increase on 2012.The grocery market's share accounts for 54.3p in every £1 of UK retail

spending.

Figure2.

Source: IGD UK channel forecasts 2012

Market growth is also important to estimate how much market has grown over the previous

years.

Figure 3.Market share

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Source: Kantar World Panel (12 weeks to 22 January 2012)

So, itcan be seen clearly that Morrison is the fourth biggest supermarket with 10.4% market

share (See table in appendix A for more detail). Four big supermarkets have over 76% market

share between them, so it gives them oligopolistic markets characteristics. Much of

competition between oligopolists in terms of marketing of their particular brand (Sloman,

Hinde and Garrat,2010)

3.1 PESTEL analysis

PESTEL framework is a comprehensive list of influences on the possible success or failure of

particular strategies. The PESTEL framework categorises environmental influences into six

main elements such as political, economic, social, technological, environmental and legal

(Johnsonet al., 2008). PESTEL analysis rely on past events and experience, however it can be

used as a forecast of the future(Lynch,2004;Fleisheret al.,2003).According to Grant(2005)

business environment of the firm consists of all the external influences that affect its decision

and performance(Grant,2005)

Political factors

UK and EU legislation have great impact on UK food retailers.They are regarding to

planning, licensing, pricing, competition and customer protection. Competition Commission

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regulations are created in order maintain healthy competition between supermarkets and they

investigate issues such as relationship between retailers and suppliers, unfair competition

(Competition Commission, 2013).

Food Standards Act 1999 - the main purpose of the Act is to establish the Food Standards

Agency, in order to protect public health in relation to food production and supply chain

(Food standards agency, 2013).The British Retail Consortium (BRC) is the main trade body

for the food retail industry in the UK representing more than 90% of companies involved in

this industry (BRC, 2013). Food hygiene is monitored by the Environmental Health

Department which is main issued for food retailers in industry. Morrison has established

better relationships with National Farmers Union and greatly supports British farmers.

Government legislation aimed at limiting out-of-town developments can make it difficult for

supermarkets to obtain planning permission for new out-of-town stores it provides advantage

for existing Supermarkets.

Economic factors

Economic factors one of the main elements in analysis. They are always changing and it is

difficult to predict them. The global economic recession and accordingly the UK recession

affected all businesses and food retail companies as well in UK.Rising Energy costs,

transport costs, raw material costs have a huge impact on supermarkets and to their supply

chain cutting profit margins (Lynch, 2012).

Economic factors are given in table below and economic forecast table inserted in Appendix.

(See for details)

Table1.UK Economic Trends (000, £m, %, million and £), 2007-2011

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Source: KeyNote 2013

Socio-cultural factors

Consumer buying patterns always changing as it depend on their eating habits. Lifestyle- of

today’s consumermodern and busy; increase on number of working women, less time for

shopping andthey prefer to buy ready meals or half ready meals instead of start cooking from

scratch.. So, consumers become cash rich (the earnings gone up) but time poor.

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Consumer confidence- food poisoning, horse meat scandal affected industry in total sales in

Tesco, ASDA, Iceland, ALDI frozen food sales went down (Guardian, 2013).

Education and health – consumers are nowadays more educated and looking for healthy

eating habits. In order to support these and boost sales supermarkets offering now food

recipes in their website and magazines which they provide free in the shops. Morrison

collaborates with the UK’s top chefs. Bryn Williams, Nigel Haworth, Aldo Zilli,

AtulKochhar and Pierre Koffmann have worked with Morrison on part of the rebrand of its

meal solutions range, M Kitchen (Morrison, 2013e).

Technological factors

Technology is constantly changing, it is dynamic. It must be constantly monitored and

companies must be prepared to adapt their approach to markets (McDonald, 2004).The author

explains some of them below:

Self scanning – it saves time, queuing and saves personnel employed. It allows customers

scan their purchases and pay for them in dedicated checkouts.

In store direct marketing – it offers and promotions will be printed with shopping receipt

based customer behaviour.

Loyalty cards –based on them supermarkets predict customer’s behaviour and changing their

stock accordingly, segmentation and branding quite important.

Internet-online selling and distribution in to doorstep or to chosen store (convenient one).Key

Note estimates that sales of groceries transacted via online channels observed double-digit

growth between 2007 and 2011, increasing by 127% overall(Key Note,2013).Great impact of

social media such as Twitter and Facebookin order support supermarkets brand. Consumers

have blogs and it is also have affects customers buying behaviour and supermarkets mostly

encouraging customers to leave their feedback about product and services.

Environmental factors

Great impact of CO 2 Emission, Carbon footprint, less travel miles on Morrison products as

the result of close warehouse locations to main shops (Morrisons, 2013b).

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Legal factors

Legislation affecting Morrisons and other businesses are: Employment Laws, Health and

Safety laws, Laws about acquisition and mergers. (Lynch, 2012)Employees may also have

contractual rights better than state minimums which provide better cover. These additional

rights are gained, in the main, through agreements unions have negotiated with employers.So,

there is important role of Trade union on protecting employees and equality and human right

commission looks after issues raised about working condition, working hours, gender

equality (The Trades Union Congress,2013)

3.2 Porter’s Five Forces Analysis

Grant (2005) argues that Porter’s Five forces of Competition framework views the

profitability of an industry as determined by five sources of competitive pressure. This

analysis was structured and presented by Michael Porter. This model identifies five basic

forces that can act on the organisation. It is been summarised (see table3 inAppendix C)

The bargaining power of suppliers

1. The bargaining power of buyers;

2. The treat of potential new entrants;

3. The threat of substitutes;

4. The extent of competitive rivalry.

The bargaining power of suppliers

Porter (2004) suggested that suppliers are more powerful when only few suppliers in the

market and there are no substitutes for the supplies they offer.It makes difficult switch from

one to another. Morrison’s bargaining power of suppliers is quite low, as major supermarkets

have big buying power. So, they have been able to drive costs down by forcing suppliers to

offer discounts as the result suppliers especially growers’ profit margins been cut, however

these cost savings to the supermarkets have not been passed on to consumers(Sloman,2010).

Power of suppliers=low

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The bargaining power of buyers

Porter (2004,p24) states that ‘buyers compete with the industry by forcing down prices,

bargaining for higher quality or more services, and playing competitors against each other –

all at the expense of industry profitability’. Most of the products of retail grocery stores offer

are undifferentiated. So, buyers can always find alternative to switch from one supermarket to

another without problem. Research shows that most customers are not loyal to one brand.

According to ZeithamlSurvey(Promise,2009)the ‘80/20 rule’ was observed across retail

industries and suggests that almost 82%of profits are generated by 20% of the firm’s

customers.So, as assumption Bargaining power or buyers=medium

The treat of potential new entrants

According to Sloman (2010) the most important barrier to entry is the difficulty in getting

planning permission to open a new supermarket thus restricting consumer choice.

Other barriers are the large economies of scale and the huge buying power of the established

supermarkets, which make it actually impossible for a new player or for the smaller

convenience stores to much their low costs. Any new entrant supposed to come in on a large

scale in order to achieve low cost level (Lynch, 2006).Capital requirement is high as entry to

market involves huge investment in distribution, service and technology. Four big

supermarkets already have big share in market new entrants find extremely hard competition

and consumer expectations growing nowadays. Government policy could be as risk for new

entrants.

Assumption threat of new entrants=medium

Threat of substitutes

Lynch (2006) argues that substitutes do not entirely replace existing products but introduce

new technology or reduce the costs of producing the same product. Threat of substitutes is

high as against Morrison a lot of convenience stores, forecourts supplying products to

shoppers. Existence of close substitutes makes consumers being very sensitive on price that

they will switch easily to another supermarket or online shopping.Morrisonis the only

supermarket which does not offer online shopping yet to customers. However, Morrison can

reduce its grocery cost as the result of good vertical integration of supply chain. Earlier

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mentioned 100% beef, pork, lamb and chicken sold are British. Morrisonowns its packing

factories and bakeries it gives more advantage over other supermarket rivals.

Threat of substitutes=high

The extent of competitive rivalry

Increased rivalry among grocery retail shops may occur when competitors are roughly the

equal size and one competitor decides to gain share over the others (Lynch,

2006).Competition within an industry determined by several factors (Fleisher and

Bensaussan, 2003). They are: market growth, cost structure, barriers to exit, switching cost

and diversity. If market is growing slowly and company wants to be dominant in the market

in this case it need to take sales from competitors –increasing rivalry. According to

Lynch(2006) ‘where fixed costs and the costs of finished products in an industry high, then

companies may attempt to gain market share in order to achieve break even or higher levels

of profitability.Barriers to exit are very high for retail grocery industry.

Competitive rivalry=very high

4.0 Internal analysis of Morrison

4.1 FinancialAnalysis of Morrison

According to Jenster and Hussey (2004) any appraisal of businesses should start with

financial performance. Financial performance is only measured by using financial ratios

(McKenzie, 2003). According to Atrill and McLaney (2008) financial ratios provide a quick

relatively simple means of assessing the financial health of a business. It is simply relatesto

one figure appearing in the financial statement to some other figure appearing there (for

example, operating profit in relation to capital employed).

Atrill and McLaney (2008) state that by calculating small number of ratios it is often possible

to build up a good picture of the position and performance of a business. Therefore, ratios

widely used by those who have an interest in businesses and business performance.

Ratios give idea for what is going on in the company. In isolation they are meaningless, so it

is necessary to look at trends; at the company’s performance over number of years. Chart

below (figure 4) shows how is main supermarkets grown over the years.

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Figure 4.

In order to calculate trends it is important to have data for more than two years, so, 5 year

financial summary is taken to calculate trends in turnover and pre-tax profit. Normally, the

first year chosen as base year and set to 100.

All subsequent years expressed as a percentage of the base year. The author used data from

Key Note.

Table 2.Morrisons profit and Loss account for 2008-2012

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Source: Key Note 2013a

Morrison Turnover for 2008=12969000 set to 100%

Morrison Turnover for 2009=14528000/12969000 x100=112.02%

Morrison Turnover for 2010=15410000/12969000 x100=118.82%

Morrison Turnover for 2011=16479000/12969000 x100=127.06%

Morrison Turnover for 2012=17663000/12969000 x100=136.2%

And the same method I shall use for pre-tax profit base year 2008

Morrison Pre-tax profit for 2008=612000 set to 100%

Morrison Pre-tax profit for 2009=655000/612000 x100=107%

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Morrison Pre-tax profit for 2010=858000/612000 x100=140%

Morrison Pre-tax profit for 2011=874000/612000 x100=143%

Morrison Pre-tax profit for 2012=947000/612000 x100=155%

So, using these calculations following graphs (figure5) been included financial consequence

that both turnover and pre-tax profit have grown steadily over the last five years.

Figure 5.

Source: Key Note 2013a

However, Morrison turnover is the lowest among Tesco, Sainsbury’s and Asda. In appendix

ratio benchmark of above supermarkets given (see for detail)

According to Preliminary Results announced by Morrison (2013f) company profit dropped

net profits were down 6% to £647m ($966m) for the year ended 3 February. Operating profit

in the period amounted to £949m, down from £973m last year, while underlying profit before

tax was down 4% to £901m.(2011/12-£935m). Like- for- like sales (ex fuel, ex-VAT) down

by 2.1% (2011/12-up1.8%).

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4.2 Value Chain Analysis

Value chain analysis(VCA) is a method used to identify potential sources of economic

advantage by suggesting how the firm’s internal core competencies can be integrated with

theexternal competitive environment to direct optimal resource allocation (Fleisher and

Bensaussan,2003). Professor M. Porter popularized the value chain concept in his 1985 book,

Competitive Advantage. According to Grant (2005) VCA separates the activities of the firm

intothe sequential chain. VCA starts with the goal of competitive strategy, which is to create

customer value in excess of the costs of delivering that value –this is source of firms profit

(Fleisher and Bensaussan,2003).Porter classifies value chain activities into primary activities

and support activities.

1. Primary Activities

Inbound logistics – Vertical Integrated supply chain. Morrison own 3 abattoirs, 3 bakeries, 6

fresh fruit and vegetable packhouses, 1 food preparation factory. It gives advantagesin

controlling the quality of food which Morrison offers. Manufacturing facilities close to

distribution centers it allows cut cost and waste, reducing food miles as well.

Operations – in house craft skills, food preparation in store allow quickly react to customer

demand, quick respond increase efficiency. These are reducing waste, only producing what

customers wants and products are always fresh.100% beef , lamb and chicken sold British

produced, so it supports British farmers, 100% fresh Milk from local farmers where Morrison

stores located. Cost saving and freshness leading factor.

Outbound logistics-Fast delivery speed from warehouse to shop and from growers to shop. 18

million cases distributed to stores each week and Morrisonhas 12 distribution centres across

the UK. The distribution fleet over 700 tractors and 1.800 trailers, quickest turnaround time

between order and delivery compared to competitors.Reducing carbon footprint by cutting

travelling distances.

Marketing and sales–Morrisons has unique, high profile advertising campaign, it highlighted

Morrisons’ Market Street and most viewers could recall when it first took to television

screens last summer(Morrisons,2013g).It has good PR and promotes social responsibility

through sponsoring charities, sponsoring local schools though ‘Lets Grow ‘programme as

well.

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Service – Active JIT service, customers needs determined quick and responded accordingly.

2. Support Activities

Technology development - IT system replacement programme in order increase cost saving.

E-commerce investments in FreshDirect and kiddicare.com

Human resource development- Morrison’s Academy biggest ongoing training programme in

UK retail, it helps new and young graduates to get jobs and climb up into a position which

they desired in theorganisation. Employee motivation high because Morrison scares about

employees and 42% of employees were with company over 5 years (Morrisons, 2013c)

Firm infrastructure –supporting all stakeholders. Morrisons number one priority isCorporate

responsibility.

4.3 SWOT analysis

An analysis of the Strength and Weaknesses present internally in the organisation,

Opportunities and Threats organisation faces externally (Lynch,2006).In this paper SWOT

will be drawn accordingly to resource based analysis which is a value chain and environment

based analysis like five forces and PESTEL.

Figure 6.

STRENGTHS WEAKNESSESFAVOURABLE UNFAVOURABLE

INT

ER

NA

L

o Strong Unique Selling Pointo Effective supply chain managemento Strong financial positiono Strong manufacturing capacitieso High service standard

o No online businesso No convenience storeo UK dependencyo Labour intensive model

EX

TE

RN

AL

OPPORTUNITIES THREATSo Organic, green, ethical productso Carbon offset, food mileso Diversificationo Convenience store developmento Online storeo Overseas expansion

o Online retailingo Price competitiono Competitive environment

Source: Created by author (2013)

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4.4 Generic strategies

Porter’s generic strategies very important in order to evaluate company’sstrategy (Lynch,

2006). Porter (2004) claims that any business could undertake one of the three fundamental

strategies: cost leadership, differentiation, and focus. According to it company supposed to

choose one of these strategies to gain competitive advantage.

Low cost leadership in food retail sector obviously gained by LIDL and ALDIover the last 5

years, Tesco was trying to get in that position but Morrison was known for its differentiation

strategy by offering fresh food and in house prepared food and according survey prices was

higher than average(Promice,2013). But last two years company is competing pricewise as

well with its major rivals Tesco and Sainsbury’s and ASDA, and Morrison created an M

kitchen range and M savers basic brand of the company. Morrison wants to offer affordable

price in all ranges for customers.

As professor Porter mentioned on his works ‘there real dangers for the firm that engages each

generic strategy but fails to achieve any of them-it is stuck in the middle’(Lynch,2012 and

Porter, 2004). Morrison now in a situation stuck in the middle. Porter states that the firm

stuck in the middle is almost guaranteed low profitability (Porter, 1980).As the result profit

margin get down for year ending 2012.

6.0 Recommendations for Future Objectives

5.1 SMART Objectives

The SMART objective framework is used here to establish future objectives for Morrison.

The table below shows the SMART objectives.

Element Goal

Specific The specific objective of Morrison is to increase its market share and secure

leadership position by increasing its monthly sales turnover

Measureable Morrison would like to increase its current market share by 5%

Achievable Prior to devise any for increasing its market share, Morrison needs to evaluate

different market options to ensure viability of selected strategy

Realistic/relevant The selected market option will be suitable to all stakeholders and Morrison’s

capital and investment will be used to increase its market share up to 5% within

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a particular time period

Time based The maximum time to achieve desired objectives is 12 months

5.2 Available Market Options

The Ansoff Matrix is the tool to understand the growth possibilities and risks associated with

them. The Ansoff matrix is also popular as product/market expansion grid. The matrix

provides four growth strategies including market development, market penetration, product

development, and diversification (Ansoff, 1957). Morrison can use the Ansoff matrix to

retain existing customers in the market where it operates and also can attract new customers.

But it depends which strategy is feasible for the superstore. The following diagram

demonstrates six market options available to WM Morrison.

Existing products New Products

Exi

stin

g M

arke

t

1. Expand organically

2. Expand by acquiring a competitor 3. Introduce an online shopping store

New

Mar

kets

4. Overseas expansion

5. Developing convenience store and target new customers

6. Develop non-food business

The first option that Morrison can consider is to penetrate the market by expanding

organically. This option is about making available more grocery and food items for

customers. For this purpose, the superstore could focus on building more store capacity in

two ways: (1) by making extensions to the existing stores to make them bigger; or (2)

Market Penetration Product Development

Market Development Diversification

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building new stores throughout the UK especially where people need these stores, for

example at the edges of towns where no big stores are located.

The second strategic option in market penetration is to acquire a supermarket competitor such

as Iceland, ALDI, or LIDL. For this Morrison needs to do market research at extended level.

Also, the superstore will need to collaborate with banks and other stakeholders to generate

funding and then finally Morrison will be able to prepare a plan for acquisition.

In terms of product development strategic options, Morrison can introduce an online

shopping storesuch as TESCO.com or Ocado. The preliminary steps that Morrison needs to

take are: to develop a robust website, build a viable distribution network, and ensure proper

stock management. After that Morrison can adopt strong marketing campaign to advertise its

online store.

There are two strategic options available for Morrison in terms of market development. First

is the overseas expansion and second developing convenience store and target new

customers. To adopt overseas expansion option, Morrison needs to amend its business model.

The best options for overseas expansion are to expand to Europe, Asia, or America. But to

properly implement this strategy, Morrison needs to conduct extensive market research,

establish relationships with international agencies or joint ventures, and more importantly to

ensure supply chain management. On the other hand, Morrison can establish small

convenience stores in town centres or near motorway. For this the superstore may need to get

planning permissions (Guy, 2006).

Finally, diversification is the last option that Morrison can consider. For this, Morrison may

need to introduce new product in new markets. For instance, superstore may introduce

clothing, electronic items, or financial instruments. Implementing diversification strategy

could be hard for Morrison as it is highly risky and requires many crucial decisions and huge

investment (Mayo, 2010).

5.3 Evaluation of Market Options

The strategic options can be evaluated in terms of cost/benefits. The cost and benefits of each

strategic option can be evaluated on the basis of three key criteria such as Suitability,

Acceptability, and Feasibility described by Johnson et al. (2008). The table below shows the

evaluation of available six strategic options.

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Criteria Strategic Option Score Total

Option 1: Organic growth

SuitabilityIt is compatible with the existing strategy of Morrison as well as the superstore has already experienced expansion in the past

5/5

15AcceptabilityMorrison has low risk in adopting this strategy because it is the expansion of its core business. 5/5

FeasibilityIt is probably the easiest option as compared to other available option. Also, the superstore can easily arrange capital for investment from stakeholders

5/5

Option 2: Growth by acquisition

Suitability

This strategy is suitable as Morrison experienced acquisition in the past. In addition, it is quite logical to expand market at this time of recession using horizontal integration

5/5

12Acceptability

Medium to high risk due to stakeholder consideration in terms of expected synergies. But on the other hand, it would be a difficult experience

4/5

FeasibilityThe acquisition will require an integration strategy with significant capital and investment 3/5

Option 3: Establishing an online store

Suitability

This strategy represents a cultural shift. The strategy of online store is suitable in terms of its support for corporate growth objective. However, it ignores the store’s current strengths in the grocery business.

3/5

11Acceptability

Medium risk due to increasing online shopping trend. But stakeholders have lack of interest in this business 4/5

FeasibilityOnline business is easy to design and launch and it requires additional delivery work and supply chain management

4/5

Option 4: Overseas expansion

Suitability

Overseas expansion option is suitable in terms of its compatibility with Morrison’s growth objective. But in contrast, the superstore might face gaps in new market for British products

3/5

9Acceptability

High to medium risk as evidenced in TESCO case. Similarly, overseas expansion will be a new experience for Morrison as well

3/5

FeasibilityAlthough, Morrison will face financial support from overseas firms but extensive remote work and joint ventures could limit the scope of overseas expansion

3/5

Option 5: Convenience Store

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Suitability

The convenience store option is not suitable for Morrison especially at this time when convenience market is already occupied. In addition, Morrison has no past experience for convenience stores. Also, if Morrison will adopt the model, it needs big changes in its ‘Fresh Mantra’ model

1/5

7

AcceptabilityMedium risk due to slow return on investment. Also, this strategy represents a cultural shift 3/5

FeasibilityAvailability of capital for expansion. Also feasible in terms of acquiring existing convenience stores 3/5

Option 6: Non-food business

Suitability

Introducing non-food items requires extended retail skills. In fact, Morrison already has some non-food items. But non-food business is not compatible with Morrison’s vision statement

4/5 11

AcceptabilityLow to medium risk but unknown returns. Entering non-food business is acceptable to stakeholders and directors in terms of profit maximisation

4/5

FeasibilityIt basically will require staff training and more storage space. It is also required for Morrison to build strong relationships with suppliers

3/5

In the above table, it can be seen that organic growth and acquisition strategies scored high

marks and therefore they are the appropriate strategic options that Morrison can adopt to

grow in the future.

5.4Marketing strategy

5.4.1 Market segments

The segmentation matrix can be used to identify the market segments of Morrison. By

keeping in mind the organic growth and acquisition market options, the following

segmentation criteria are defined to recognise market segments. The customers are segmented

on the basis of their preference to value of money, convenience, freshness, and service for

buying food items.

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Segmentation criteria Variables Description

Geographic UK All over the UK

Value of money Price Cheap food items

Convenience Location Town and popular places

Freshness Quality Best and fresh food items

Service Product availability

5.4.2 Targeting Segments

For targeting the segmented customers Morrison can employ one of three targeting strategies.

For instance, differentiated, undifferentiated, or concentrated (Kotler, 2003). At this time

when Morrison is looking to increase its market share, undifferentiated strategy is suitable for

the superstore. The reason is that using undifferentiated strategy, Morrison can convey a

same message to everyone. The superstore is not looking to target niche group, therefore the

concentration and differentiation strategies are not suitable (Stone and Desmond, 2007). In

addition, setting up joint promotional campaigns and exploiting emerging trends can also

help Morrison to target consumers (Proctor, 2000).

5.4.3 Positioning Strategy

The segmented customers will be positioned by implementing appropriate advertisement

strategies. The popular brand name of Morrison is a key differentiator that will help it to

positioning the market. Morrison can adopt the following tactics for as a positioning strategy:

offer hot deals on seasonal food items, high advertisement of a newly opened store in the

local area, and providing excellent service to customers in stores.

For the positioning strategy, it is essential to develop an effective communication plan (Jakki,

2011). The following table shows how Morrison can target its customers using appropriate

communication elements.

Elements Communication objective

Positioning customersThe customers can be communicated through advertisement using print

media, television, radio, and ads on other suitable communication channel

Competitive advantageThe competitors will be competed on the basis of segmentation criteria

defined in the table in section 5.4.1.

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5.4.4 Forecast

The following is the forecast of sales, profit margin, and net profit for the period of three

years after implementing the marketing strategy.

Year 1 Year 2 Year 30%

2%

4%

6%

8%

10%

12%

6.0 Summary &Conclusion

WM Morrison secures a strong position in the UK food retail sector. Its business model and

mission objectives are clear and transparent for the stakeholders. Although the superstore has

a sound financial position in the market but the market share compared to other superstores

i.e. TESCO, ASDA, and Sainsbury is not ‘good’. The environmental analyses of Morrison

reveal some key issues such as lack of using latest technology i.e. online retailing, no

convenience stores, UK dependency, or tight rivalry on the basis of food prices. After

evaluating different market options, it is found that ‘organic growth’ or ‘growth by

acquisition’ could be appropriate market options for Morrison. The segmentation criteria for

targeting customers in the UK market are defined on the basis of four parameters: price,

location, quality, and product availability. Morrison can target segmented market by

communicating its key strengths to the customers. In this way, the market share could be

increased up to 5% after three years.

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Appendices

Appendix A

Table.1-Market share of UK Grocery Market

Source: Kantar(2013)

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Appendix B

Table2.-Economic Forecasts (000, % and million), 2012-2016

Source: Key Note (2013)

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Appendix C

Table3. - PORTER’S FIVE FORCES ANALYSIS OF MORRISON

FORCE IMPORTANCE SCALE

Threat of new entrance MEDIUM 3/5

Threat of substitutes HIGH 4/5

Bargaining power of suppliers LOW 2/5

Bargaining power of buyers MEDIUM 3/5

Competitive rivalry between competitors

VERY HIGH 5/5

Source:Created by author(2013)

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Appendix D

Table4. – Ratio Benchmark

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Source: FAME (2013)

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Appendix E

Table5.-Morrisons Ratio analysis (2007-2010)

Source: Key Note(2013)

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Appendix F

Table6.-PESTEL ANALYSIS (summary)

FACTOR KEY FINDINGS

POLITICAL

Competition Commission regulations

Food standards Act 1999

Competition Commission Regulations

Planning Policy Guidance

Government legislations

ECONOMIC

Impact of economic crisis

Impact of unemployment

Rate of inflation

Impact of GDP and Household disposable income

Population growth

Energy and transportation cost

SOCIALLifestyle changes

Consumer confidence

Education

TECHNOLOGICAL

Self scanning

Direct marketing

Internet, mobile apps, facebook, tweeter impact on consumer buying

ENVIRONMENTAL Issues of Carbon gas (CO2) emission

Health and safety concerns

LEGAL Employee rights

Lows for acquisition ,mergers and joint ventures

Source: created by author (2013)