MBO Case Study Final Draft
Research will be applied where necessary to identify key factors both Internally and externally to the organization that have impacted the development of he business over time.
The management role will also be examined to display the importance of management style and strategic planning when determining the success of a business. According to Porter (1996), “competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value. Barney (1986) explains that competition can have different definitions for businesses in deferent contexts and once the individual meaning is Identified, It can be Integrated Into a single developmental framework, which Is needed In order for an organization to prosper over time. Laid, a privately owned supermarket retailer which is renowned for its “everyday cheap” mentality, was established in Essen, Germany in 1946 with the business split into two parts in 1960; Laid Nor, which operates in the North of Germany and Laid Suds, which is based in the South.
The organization has greatly expanded into a multinational business over time (Ruddier, 2013). Barriers to Lid’s entry into the UK market are explored in the International Journal of Dilutions and Retail Management where It Is suggested that the three main obstacles are; Intense competently from other supermarkets thin the K, low profitability within the grocery retail market in general and also the scarcity of new store sites (Duke, 1993).
One of the possible explanations for the supermarket’s recent success within the I-J is believed to be an increase in middle class consumers coming to the store due to tightened purse strings, similar to how the business prospered during post world war two Germany when first founded (BBC News, 2014). Laid Is now one of Germany’s biggest retailers, arriving In the UK In 1990 and opening its 50th store in 2013 (Ruddier. 013).
The idea that the popularity of permeates around the world has increased in general is further explored by Trail (2006), who suggests that rising incomes, resulting in higher ownership of consumer durables such as fridges and cars, has resulted in an increase in numbers of customers from poorer areas and smaller towns.
The recession triggered by the financial crawls In the UK may have given Laid a competitive advantage over the other supermarkets, encouraging more consumers from deferent backgrounds and social classes to try out the store for the first time and also the smaller selection of products allowing for the organization to keep tighter control of costs (Hawkers, 2013). In carrying Just 1,000 SKU compared to around 10,000 in traditional supermarkets allows Laid to maintain quality and keep prices low (Creepy, 2010).
Due to the sharp increase in revenue and a growth in market share within the area (BBC News, 2014), III NAS Intentional a potential opportunity In ten UK Ana Is working towards Turner expansion, with the aim to invest in new stores throughout Britain doubling the number of stores to 1,000 and in turn, hiring 35,000 new members of staff (Felted and Barrett, 2014). One of the possible examples of international strategy outlined by Henry (2011) is “Multidimensional Strategy’ which involves adapting a product for use in national markets to respond more effectively to changes in local demand conditions.
Failure to recognize this strategy and implement where needed has previously resulted in the collapse of international expansion plans for the popular US supermarket, Wall-Mart, after entering the German market in 1998 and ineffectively realizing and adapting to the nation’s culture (Landler and Barbara, 2006). An example of Lid’s successful strategic decisions when adapting to international ultra is their heightened investment in advertising within the UK (1. % of its estimated annual turnover) as opposed to in Germany itself, where it acts towards a policy of no advertising, aside from a weekly newsletter (Springing, 2014). Previous television ad campaigns have proven very popular in previous years, with their “Gin loving pensioner” being the most likeable television advert of 2011 (Plunked, 2011). Organization Chart at Laid (elderberries.
Com, 2014) The above organization chart shows a simplified form of the organizational structure at Laid.
The organization is structured into five main departments; warehousing/ remonstration, real estate, purchasing and administration. Laid believe that their relatively flat management hierarchy in their divisional structure allows for better communications between departments, promoting the contribution of ideas and suggestions which in turn creates quicker and more effective decision making (Elderberries. Com, 2014). Henry (2011) supports this further, explaining that due to the divisional aspect that allows less centralized decision making, managers can respond effectively to the needs of their business unit.
It is also added that there is a ore clearly defined career path within this organizational structure, encouraging promotion from within the company with over 85% of directors recruited from within the company (corporate. Laid. Co. UK). It can be argued that it was for these attractive developmental opportunities along with a highly sought after graduate scheme with a high starting salary and immediate responsibilities that Laid was voted the sixth best graduate employer in 2013 (Biracial, 2013), the highest retailer on the list.
They employ a hardworking culture, with lots of responsibility in return for salaries that re some of the highest offered within the industry (Corporate.
Laid. Co. UK, 2014). Advantages of internal promotions and high incentives for career progression for internal staff is examined by Depart (2006) who suggests that hiring from within the company lessens the recruitment and screening costs that are associated with hiring form outside of the business.
Gabon and Wilkinson (2003), suggest that that there has been a concentration of the I-J supermarket industry over the past two decades due to centralization of activities, uniformed store management and also with cost cutting. The department heads with the most subordinates are warehousing and operations, which includes shop floor sales staff.
The simpler structure of the purchasing unit which only has the director listed may be due to Lid’s smaller range AT products possibly leaning to more straightforward Inventory control as suggested by Ala and Oar (1997).
Porter (1985) considers the relationships between inbound and outbound logistics and operations, the two most padded units within Lid’s structure, by grouping them together as “primary activities” with purchasing and technical procedures as “supporting activities”. It would seem that Laid work to this model, when taking into account the structure given on their US website.
The warehousing and transport and the operations functions deal with the direct creation of the retail service in that they transport the goods and sell them to the customer whereas the other functions work to ensure that these primary activities are carried out efficiently and effectively (Henry, 2011). It can be proposed that it is the flat structure, linked with the business employing lower staffing levels than most other retailers that enables Laid to offer higher rates f pay for workers along with the promise of managerial autonomy (Mussel, 2011).
This strategy can improve the reputation of a business and increase staff retention and productivity (Attract and Tomato, 2006).
However, not all employees agree with this strategy. In 2010, over 200 Laid employees in the US filed charges against the firm for being wrongly exempt from overtime pay, suggesting that the lower staffing levels result in as much as 70 working hours a week while being on a salary that omits overtime payment entitlements (Choc, 2010).
One of the challenges that Laid tangentially faces is the increase in the use of online shopping, especially within the I-J, which has the highest valued online market spending more than any other developed country online (Barrett, 2014). Although the organization has expressed carrying on as it is due to current success (Somerville, 2014), future investment could prove effective with the increase in the use of online services within Britain to take advantage of the opportunity (Britons spend on average E,OHO each online per year) to avoid falling behind competitors.
It can also be suggested that the location of the permeates will play a big part, due to the fall in out of town supermarkets due to online grocery shopping (Barrett, 2014). It can be argued that Lid’s strategy of everyday low prices which it shares with main competitor Lid, as opposed to running seasonal promotions in line with the “Big Four” competitors; Tests, Wall-Mart (USDA in the UK), Kingsbury and Morrison, has become advantageous in the current economic state (BBC News, 2014).
However, it is suggested by Ala and Oar (1997) that this may come with the expectation of a lower service level.
Laid stores did not equip reduce scanners until the early asses (BBC News, 2014). This, combined with employing a smaller number of shop floor staff, was likely to result in longer waiting times for service as cashiers had to hand type product codes into their tills. This contrasts with Ala and Aras’s (1997) assumption that every day low price supermarkets attracts more time constrained consumers which may have impacted the decision adapt to changes in the market by introducing the technology required as this may affect factors outlined by Beauteous and Gauche (1990) such as a fast check-out and courteous in-store help.
A SOOT analysis (Andrews, 1971) referring to Lid’s strengths, weaknesses, opportunities and threats concludes that the organization’s strengths lie in it’s simple, “no frills” concept, which keeps expenses low due to a smaller product range which necessitates fewer members of staff and helps to streamline ten supply canal process (Ala Ana Oar ( I en purchasing team also work closely with suppliers to ensure that quality is of a good standard to make up for the variety offered at rival retailers (Mussel, 2011).
The privately owned business also benefits from such advantages as limited liability and ability to sell shares to enervate income although disadvantages include the need for financial annual reports to be biblically posted along with increased adman fees in order to keep in line with the Companies Act as well as reduced level of control.
Other weaknesses could include the lack of an online shopping function, which is becoming more relevant as time progresses, especially within the I-J (Barrett, 2014).
With the current assumptions that Lid’s increased customer base is due to the ailing economy (Hawkers, 2013), it can be assessed that a dependence on the state of the economy an make sales forecasting difficult, potentially creating problems for purchasing operations, possibly affecting sales due to issues with stock levels. There is an opportunity for expansion due to interest recently being heightened for low price stores (BBC News, 2014) meaning that Laid could work successfully towards expansion within the UK and similar economies.
There is however, a threat in the form of the rival grocer with a similar low price strategy, Lid, who also have expansion plans due to the positivist of current sales forecasts (The Grocer, 2009). Although Laid should work to identify the concepts recognized within SOOT analysis when developing future strategies, there are limitations as reviewed by Henry (201 1), who concludes that it can be an ambiguous form of analysis due to the possibility of factors categorizing both as a strength and a weakness, or an opportunity and a threat.
Hence, it can only be used as an overview and is not to be taken literally without careful consideration of the industrial environment.
When leading strategic change, managers must be careful when establishing new functions as ideas that inflict with the existing culture may be difficult to implement (Henry, 2011). Schneider (2000) argues that new processes will fail unless effectively aligned with an organization’s existing business strategy. Henry (2011) also argues that “charismatic leaders” are especially effective when introducing new systems and strategies as they have the ability to make individuals feel valued and building alliances.
In conclusion, Laid appears to have a very cohesive strategy when it comes to structure, marketing and management decisions. Some of the characteristics within the organization’s equines plan resemble those outlined in Henrys (2011) overall cost-leadership strategy, outlined as “where an organization seeks to achieve the lowest-cost position in the industry without sacrificing quality. Characteristics include the vigorous pursuit of cost reductions from experience and cost minimization in areas including service.
However, it also includes reduced expenditure in advertising, which the company includes within its home country but not in the I-J (Springing, 2014). This suggests that the external cultural factor has encouraged the business to adapt to the taste and expectations of British consumers. It has also been outlined that the risks of an overall cost-leadership strategy include changes in technology, which is a heightened threat within the I-J along with the idea that customer tastes may change and may become more willing to pay more for a differentiated product (Henry, 2011).