Business Strategy

Business Strategy

 

In order for a business to be more profitable and successful in terms of growth, it has to be creative and focused on its business environment. Most successful business use Michael Porter’s strategies to gain a competitive advantage.

Michael Porter in 1985 designed four strategies. Porter called the generic strategies “Cost Leadership” (across an industry or within a particular industry segment) “differentiation” (creating uniquely desirable products and services across an industry or within a particular industry segment), “cost focus” (offering a specialized products or service at low cost) and “differentiation focus” (providing better products and service within industry segment.





 

Shoprite uses the Cost Leadership Strategy

Shop-Rite is one of the largest industries in the US, providing employment and services for millions of people.  Shoprite offer the same or better products and service at low cost than its competitors such as Pathmark, Food Town, A&P, Stop Shop, and more. Shoprite also tries to compete with super market Wal-Mart. Shop-Rite sell own branding products in stores at the lowest price.  To reduce cost, Shop-Rite has created and continues to increase its strategic lead in the supply chain, through its ongoing investment and recognition of the supply chain’s strategic importance.  Shop-Rite improved levels of product availability to reduce inventory levels and costs.

Shop-Rite implemented a self checkout lane for their customers to reduce labor cost by not hiring more people.  Through information technology, Shop-Rite collects useful information at the point of check out. The company is able to collect data on products that have a high turnover, products preferred by particular customers and the frequency of shoppers through the loyalty club introduced as the Shop-Rite plus card.

Five Forces

The Five forces model is design by Michael Porter.  Power buyers, Supplier power, threat of substitute products or service, threat of new entrants, and rivalry among existing competitors. These five forces affect every business.

 

 



 

Power of Customers:

MEDUIM

Buyer Power is the customer buying choices power.

·         Switching to another product is not costly

·         Competitors do offers low prices

·         Shop-Rite has millions of customers

·         Shop-Rite create competitive advantages by attracting more customer to buy product from their for example giving out coupons on newspapers , rewards card (whenever you buy something from Shop-Rite you get point in your card the more points you have ,more money you can deduct from your bill) which lower cost on products

·         Shop-Rite offers online shipping and  gives customer discounts online

 

Power of Suppliers:

LOW

Power of Suppliers is opposite buyer of power. Also known as switching cost.

·         Shop-Rite has a lot of suppliers whom it can purchase supplies( inventory) from

·         Businesses want to have their product display in Shop-Rite so it will not be difficult to find another supplier.

 

Threat of New Entrants:

MEDIUM

Threat of New Entrants is for new competitors to enter a market.

·         It’s hard to reach where Shop-Rite is today

·         It takes money and time to be like Shop-Rite

·         Small grocery stores

·         Wal-Mart and Target

·         Brand Name (customers like to be loyal with brand)

·         For new business entry in this sector will need knowledge and technology

 

 

Threat of Substitutes:

HIGH

Threat of Substitute products or services is how many substitutes there are to certain products.

·         Online grocery like Amazon

·         Small grocery stores

·         Online shopping can decrease expanding in market

·         Shop-Rite started offering online shopping.

 

Competitive Rivalry:

HIGH

Competitive Rivalry is how much competition is face in a market. It is easy for customers to move to substitute products from example coke to water. Shop-Rite is competing with Pathmark, FoodTown, Stop&Shop, and more also use cost differential strategy.

·         There is little differentiation between products and services and services sold by competitors

·         Small shops are also competitors and sell products at low-cost

·         Shop-Rite has good customer service and technology

·         Loyal customers

 

Shop-Rite faces limited completion from its rival due to its size with proper management and high investment on technology. Shop-Rite is able to cut its cost and pass it on its customers while at the same time making profit by using advanced technology. Shop-Rite always sends out email to their customers wherever there is discount on products. Once product is scanned it sends a signal to place orders through computers to managers than suppliers to send some more inventories. Shop-Rite locks it customers by providing best products at low prices and services.