BUSINESS AND MARKET OVERVIEW OF WM MORRISON

Explaining the factors that determine demand and supply of houses in the UK during the above period

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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 Porters 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

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%.

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 UKs 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 companys 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

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.

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 organizations most fundamental reason for being (for example Walt Disneys 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). Morrisons vision supported by brand value and strategic objectives.Morrison has made considerable progress in its strategy to position the business as the UKs 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

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 Morrisons 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 retailers 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 Sainsburys. 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,

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.

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

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

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

Source: KeyNote 2013

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

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 UKs 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 customers 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).

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 Porters Five Forces Analysis

Grant (2005) argues that Porters 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. Morrisons 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

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 firms 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

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 companys performance over number of years. Chart below (figure 4) shows how is main supermarkets grown over the years.

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

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%

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, Sainsburys 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%).

4.2 Value Chain Analysis

Value chain analysis(VCA) is a method used to identify potential sources of economic advantage by suggesting how the firms 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 salesMorrisons 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.

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- Morrisons 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
FAVOURABLE

WEAKNESSES
UNFAVOURABLE

o o o o o

Strong Unique Selling Point Effective supply chain management Strong financial position Strong manufacturing capacities High service standard

o o o o

No online business No convenience store UK dependency Labour intensive model

INTERNAL

OPPORTUNITIES
o o o o o o Organic, green, ethical products Carbon offset, food miles Diversification Convenience store development Online store Overseas expansion
EXTERNAL

THREATS
o Online retailing o Price competition o Competitive environment

Source: Created by author (2013)

4.4 Generic strategies

Porters generic strategies very important in order to evaluate companysstrategy (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 Sainsburys 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 Specific Goal The specific objective of Morrison is to increase its market share and secure leadership position by increasing its monthly sales turnover Measureable Achievable Morrison would like to increase its current market share by 5% 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 Morrisons capital and investment will be used to increase its market share up to 5% within

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
Market Penetration

New Products
Product Development

Existing Market

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

New Markets

Market Development

Diversification

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)

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.

Criteria Option 1: Organic growth Suitability

Strategic Option It is compatible with the existing strategy of Morrison as well as the superstore has already experienced expansion in the past Morrison has low risk in adopting this strategy because it is the expansion of its core business. It is probably the easiest option as compared to other available option. Also, the superstore can easily arrange capital for investment from stakeholders 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 Medium to high risk due to stakeholder consideration in terms of expected synergies. But on the other hand, it would be a difficult experience The acquisition will require an integration strategy with significant capital and investment 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 stores current strengths in the grocery business. Medium risk due to increasing online shopping trend. But stakeholders have lack of interest in this business Online business is easy to design and launch and it requires additional delivery work and supply chain management Overseas expansion option is suitable in terms of its compatibility with Morrisons growth objective. But in contrast, the superstore might face gaps in new market for British products High to medium risk as evidenced in TESCO case. Similarly, overseas expansion will be a new experience for Morrison as well Although, Morrison will face financial support from overseas firms but extensive remote work and joint ventures could limit the scope of overseas expansion

Score

Total

5/5

Acceptability

5/5

15

Feasibility

5/5

Option 2: Growth by acquisition

Suitability

5/5

12 4/5

Acceptability

Feasibility

3/5

Option 3: Establishing an online store

Suitability

3/5

Acceptability

4/5

11

Feasibility

4/5

Option 4: Overseas expansion Suitability 3/5

Acceptability

3/5

Feasibility

3/5

Option 5: Convenience Store

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 Medium risk due to slow return on investment. Also, this strategy represents a cultural shift Availability of capital for expansion. Also feasible in terms of acquiring existing convenience stores 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 Morrisons vision statement Low to medium risk but unknown returns. Entering nonfood business is acceptable to stakeholders and directors in terms of profit maximisation It basically will require staff training and more storage space. It is also required for Morrison to build strong relationships with suppliers

1/5 7 3/5 3/5

Acceptability Feasibility

Option 6: Non-food business Suitability 4/5

Acceptability

4/5

11

Feasibility

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.

Segmentation criteria Geographic Value of money Convenience Freshness Service UK Price

Variables

Description All over the UK Cheap food items Town and popular places Best and fresh food items

Location Quality 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 Positioning customers Communication objective The customers can be communicated through advertisement using print media, television, radio, and ads on other suitable communication channel The competitors will be competed on the basis of segmentation criteria Competitive advantage defined in the table in section 5.4.1.

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.
12% 10% 8% 6% 4% 2% 0% Sales Market Share Year 1 5% 3% Year 2 7% 4% Year 3 10% 5%

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)

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

Source: Key Note (2013)

Appendix C
Table3. - PORTERS FIVE FORCES ANALYSIS OF MORRISON FORCE Threat of new entrance Threat of substitutes Bargaining power of suppliers Bargaining power of buyers Competitive rivalry between competitors IMPORTANCE MEDIUM HIGH LOW MEDIUM VERY HIGH 3/5 4/5 2/5 3/5 5/5 Source:Created by author(2013) SCALE

Appendix D
Table4. Ratio Benchmark

Source: FAME (2013)

Appendix E
Table5.-Morrisons Ratio analysis (2007-2010)

Source: Key Note(2013)

Appendix F
Table6.-PESTEL ANALYSIS (summary)

FACTOR

KEY FINDINGS

Competition Commission regulations Food standards Act 1999 POLITICAL Competition Commission Regulations Planning Policy Guidance Government legislations Impact of economic crisis Impact of unemployment ECONOMIC Rate of inflation Impact of GDP and Household disposable income Population growth Energy and transportation cost Lifestyle changes SOCIAL Consumer confidence Education Self scanning TECHNOLOGICAL 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)