STRATEGIC REPORT ON OPTIONS FOR MORRISONS

STUDENT NO: 1228377

Najaatu Yusuf

Strategy is what changes the course or direction of a company. Different people have different opinions of what a strategy is. The words myth dictionary defines strategy as a plan, method, of series of actions designed to achieve specific goal or effect. Strategy has also been defined by (Andrews, 1971) as a pattern of decisions in a company that determines and reveals its objectives, goals, and major policies and plans for achieving these goals, stated in such a way as to define what business of the company is into and also what kind of company it is or will be. WM Morrisons is one of the four big players in the food retail industry and currently being ranked as number four. Morrisons have claimed that their current strategy is to drive sales, increase efficiency and capture growth. However these are operational plans which differs from what a companys strategy is although (Porter, 1996) admits that they are both important aspects of any business and need to be considered. A further and in-depth analysis of the company using current articles revealed that the companys current strategy is expanding their chain of convenience stores and also going into online retail, which will be operational by January 2014. This report aims to highlight the appropriateness of continuing with the companys current strategy of expanding their convenience stores as well as entering the online grocery retailing as a strategic option for Morrison and how its best compared to the other strategic options. This strategy is a market penetration strategy as demonstrated on the Ansoffs matrix diagram below and will enable the company to compete at a level ground with its competitors.

An external analysis of the food retail industry was conducted with the help of porters five forces framework (see appendix 2) which showed the company is operating in an industry which is considered very mature, and growing at a steady rate. It also revealed that due to the current ongoing recession consumers have limit their spending on food and an increase in the number of private label brands has made costumers more concerned with getting better value for their money and less concerned about the highest quality products (Bord Bia, 2011). It also revealed a current trend that is a shift in consumer behavior, convenience for customers have become an important thought when consumers are grocery shopping and this has created an increased need, which the companies in this industry must address. (ARUP Foresight, 2012) Has identified that in the present day grocery shopping is seen as a liability as it is in conflict with the busy lives of individuals which created an important customer need that the companies in that industry needed to deal with. To address this need the companies in this industry introduced the concept of convenience stores, which provided the customers with a smaller version of the supermarket, which is more accessible to the customer. Another concept that was introduced with the advancement of the technology is the online retail and home delivery service which allows customer to purchase their groceries online and also have them delivered to their home at a time chosen by the customer.it has also been noted by (Goodman, 2011) that 8/10 consumers believe they will choose digital technologies for their purchases and groceries in the future, an it has also been evident as large retailers such as Amazon, eBay and Groupon have all created success stories and rapid growth and also gaining in the business of online retail. Tesco, which a rival for Morrisons in the industry, also revealed that they gained sales from more than a billion items in their online retailing business and has seen the business growing by 14% in the year ending February 2010 alone. The other big players in the industry including Sainsburys and Asda have already catered to this need for their customers and have ventured into the online retailing which left Morrisons lacking behind in this area and because of this they felt and impact in the Christmas of 2012 as they saw a decrease in their sales (Ruddick, 2013). Also, The convenience store channel currently accounts for 20.5% of the industry and is expected to have a growth rate of 5.8% within the next 5 years while Online grocery, on the other hand, is expected to double in the next years as consumers gain more confidence in online retail and technological advances to play a part in online retailing (Bord Bia, 2011). With the company lacking behind in these areas it has not been able to compete favorably with its main competitors such as Tesco, Asda and Sainsburys with the realization of this Morrisons has used its resources and capabilities which were evident from the RBV (see appendix 1) analysis conducted to set out plans to deal with this issues they have currently just finalized a deal and entered into a 25 years agreement with Ocado which is an online retailer to provide license to its technology, logistics and delivery platform to launch an online grocery business. Fulfillment will be from Ocados recently opened Dordon Customer Fulfillment Centre in the Midlands, with customer deliveries made through a Morrisons fleet (Harrison & Holland, 2013). Also according to (BBC, 2013) and (the guardian newspaper, 2013) they

have also acquired 49 stores belonging to the failed blockbuster movie retail chain and also 6 stores from the collapsed HMV as well as 7 stores from failed Josephs camera chain which they intend to convert into convenience stores and make fully functional by the late summer of 2013, this move they assume will challenge the dominance of the Tesco and Sainsburys in the convenience store market. This would be a more appropriate option for Morrisons as they have shown that they have the capability to cater to this strategy while still maintaining their distinctiveness of providing the freshest quality foods and also being vertically integrated and as shown in the diagram below they have been able to successfully ascertain their position in the market. Which is high quality and low price.

If Morrisons was to look at another option which is diversifying their product range by focusing and paying more attention to their clothing line nutmeg and expanding their children goods retailer kiddicare, even though it could be carving a niche for itself in the children clothing market it would be increasing the chances of the company running at a loss as this strategy is being implemented by its competitors and diversifying into other products can also lead to failure as the company may not be fully educated and have the required resources and capabilities in that industry such as brand image in the clothing industry and also may not be fully aware of the dynamics of the product. Although it could be argued that Morrisons is also doing what its competitors are doing by expanding their convenience stores as well as going into online retail, research has shown as stated earlier that due to change in customer behavior, need for convenience and innovation in technology it has become important for Morrisons to provide their customers with these services in order to competitive favorably with the other big players in the industry and its has also showed the impact of their not doing so . Again, diversifying into other products for Morrisons would also mean dealing with the complexities of integrating a new operation into their manufacturing as they have successfully created a business model of being vertically integrated (Lawson, 2013). Again another option proposed for Morrisons would be to invest in the technological advancing of RFID and NFC- contactless payment technology, and by investing in a deal partnering up with a small RFID company and gaining a head start in providing the innovative customer shopping experience and eliminating the biggest customer complain of long queues identified by (McHugh, 2003)the company could gain competitive advantage and add to their services portfolio. However, this is an expensive process which also requires expert staff in the introduction of this process and it may not sit well with their investors as analysts have become worried of the recent activities of Morrisons undertaking multiple projects (Lawson, 2013) and although this innovation will probably become the future trend of food retail according to (ARUP Foresight, 2012). Investing in this will take away resources which will be needed to address the current issues of Morrisons which is the shift in consumer behaviors and the need for convenience stores and online retail, though this strategy could be used as a future strategy once the current issues of the company has been addressed and the company has a better hold on the market. As analysts believe that without an online business Morrisons would struggle to make up for the decline in its recent sales the investors have been satisfied by the recent deal with Ocado, as they believed that this is a crucial strategy the company needed if Morrisons is to capitalize on the changing consumer shopping habits (Dobrin, 2013). This has resulted in a 1.4% increase in their shares (Nimmo, 2013). The expansion of their convenience stores will also provide 800 new jobs in different communities which shows a commitment to their corporate social responsibilities as they have acquired shops of different failed business which tops the current job loss of 780 staffs and in their statement are happy to receive CVs from the former employees of those businesses (telegraph-newspaper, 2013).

REFERENCES Andrews, K. (1971). the concept of coporate strategy . homewood : oxford press. ARUP Foresight. (2012). The future of retail. BBC. (2013, februray 17). bbc business. Retrieved may 16, 2013, from bbc news website: http://www.bbc.co.uk/news/business-21490465 Bord Bia. (2011). Retail Markets Today & Tomorrow In Ireland & the UK . Dobrin, D. (2013, may 17). you gov . Retrieved may 19, 2013, from you gov news: http://yougov.co.uk/news/2013/05/17/what-impact-will-morrisons-dealocado-have/ Goodman, A. (2011). Food Retailer Trends. Microsoft. Harrison, N., & Holland, t. (2013, may 17). retail week . Retrieved may 17, 2013, from retail week website: http://m.retail-week.com/5049214.article Lawson, A. (2013, february 13). retail week business. Retrieved may 16, 2013, from retail week website: http://www.retail-week.com/in-business/supplychain/analysis-why-food-retailer-morrisons-opted-for-verticalintegration/5045407.article MarketLine. (2013). Food Retail in the United Kingdom. Industry Profile. McHugh, D. (2003). Supermarkets test RFID Chips. Retrieved from http://www.crn.com/news/channel-programs/18830111/supermarket-testsrfid-chips.htm Nimmo, J. (2013, may 17). proactive investors united kingdom. Retrieved may 17, 2013, from proactive investirs website: http://www.proactiveinvestors.co.uk/companies/news/57026/morrisonsstrikes-delivery-deal-with-ocado-57026.html Porter, M. E. (1996). What is Strategy? Harvard Business Review . Ruddick, G. (2013, January). Morrisons' online dilemma becomes clear after Christmas turkey. Retrieved from The Telegraph: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/978648 6/Morrisons-online-dilemma-becomes-clear-after-Christmas-turkey.html telegraph-newspaper. (2013, may 18). the telegraph personal finace. Retrieved may 18, 2013, from the telegraph: http://www.telegraph.co.uk/finance/personalfinance/10066187/Marks-andSpencer-customer-fears-over-contactless-payments.html the guardian newspaper. (2013, february 26). the guardian. Retrieved may 16, 2013, from the guardian business: http://www.guardian.co.uk/business/2013/feb/26/morrisons-buys-hmv-localstores

APENDIX 1 Frameworks and models Michael Porters 5 Forces

THREAT OF NEW ENTRANTS LOW Low entry and exit costs make it appealing to new entrants Key players in the industry: Tesco, Asda, Sainsbury & Morrisons Key players limit new competitors from entering Possibility of other big

RIVALRY AMONG BARGAINING POWER OF SUPPLIERS LOW EXISTING COMPETITORS HIGH BARGAINING POWER OF BUYERS HIGH

Availability of
multiple suppliers low supplier power Ease of switching suppliers lowers suppliers bargaining power Discount deals can be made with a different

Fierce rivalry from lack

of product differentiation Big four and the abundance of rival food retailers Competitive rivalry to get a hold of bigger market share Ease of switching makes companies strive

Individual customers
dont have significant impact on players revenues Collectively, consumers have high bargaining power and the ability to impact the companys

supplier if current
supplier increases prices

activities.
Ease of switching to

THREAT OF SUBSTITUTES LOW Subsistence farming (growing your own food) is a direct substitute but is no
Source: (MarketLine, 2013)

longer a common
practice

APENDIX 2: RESOURCES AND CAPABILITIES OF MORRISONS

Tangible Resources: 1. Manufacturing Plants Is the only major retailer listed in the Big 4 to operate its own meat processing plants Is the UKs second largest fresh food manufacturer The ownership of their manufacturing plants and produce in-house meats maximizes freshness and reduces wastage. (Stones M. , 2012) Morrisons owns more than 12 distribution centers. Created many job opportunities for the local community. All their distribution centers ensure speed, freshness and cost control. Claims to have the quickest turnaround time between order and delivery compared with any other supermarket (Morrisons, 2012). Introduced automated cash counting machines for their operations. The new cash handling systems have improved the efficiency of cash office operations in many stores throughout the country. With this change many employees were removed, which has cut down costs and increased efficiency (Stones M. , 2013)

2. Distribution Centers

3. Technology

Intangible Resources: 1. Skilled human resources The company continuously recruits skilled staff members that allow the organization to follow through with their image as being the company that hires skilled butchers, fishmongers, bakers and other trained specialists so that customers of the company will receive the utmost attention to their needs. Not only is the food prepared according to customer requirements, but skilled staff members also offer knowledgeable advice to them. Staff with good relationships with customers often leads to customer retention. They have a long-standing working experences with longley farm for 46 years and 16 year partnership with CM Mercer to be an example of what can be achieved with good, open and honest communication. Acquisitions or partnerships with different companies give Morrisons a grip on potential increase in growth. Acquisitions, mergers or strategic alliances are useful for growth since it is strategically wise to combine with companies that are either doing the same thing or perform activities that will complement the companys undertakings. It also allows the company initiating the acquisition to tap into the other companys capabilities, market strength and distribution networks (Thomas, Herd, Dickman, Lanius, & Francis, 2012). Morrisons has implemented this well over the years with acquisitions of Safeway in 2004 and Kiddicare in 2011 to name a few. Their brand image is that their products are freshly produced everyday and the company bases all of their operations on the concept of freshness in order to satisfy customer needs.

2. Good relationship with farmers and suppliers

3. Acquisitions

4. Brand image