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Wm Morrison Supermarkets PLC better known as “Morrisons” Author: Mark Tottman

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Opening thought…

“A person buying ordinary products in a supermarket is in touch with his deepest emotions” JK Galbraith
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Strategy Toolkit Contents • • • • Introduction Thinking strategically Strategic analysis of Morrisons’ business Strategic options for Morrisons tutor2u .

Yorkshire It is important to remember that. However. there are no right or wrong answers – just problems that need addressing and choices that have to be made The views and opinions expressed in this document are just our opinion.Introduction • This presentation reviews the market for supermarkets and takes you through the key corporate strategy issues facing Morrisons. don’t forget that you need to form your own views – and be ready to explain and justify them in your Unit 4a examination paper Print this presentation out and add your own notes to it as you work through the case study or download it onto your laptop and annotate it There are some suggested web links at the end of the presentation for you to follow up as part of your detailed research programme Above all – remember that Unit 4a is about: – Thinking strategically – Thinking “big picture” – Thinking “synoptically” – i. in corporate strategy analysis. a public limited company listed on the London Stock Exchange with its headquarters in Bradford.e. Hopefully you will find them helpful. recognising that strategy issues are not just about marketing or finance or production – but about inter-related issues tutor2u • • • • • .

class. you need to answer the questions actually set. VLE and class notes should cover those fine. Examiners have a habit of asking tricky questions. You need to get thinking about supermarkets! tutor2u • • • . read between the lines – and presented the key features Added some information to bring the case study up to date for 2010 Linked the analysis to the new Edexcel specification for Unit 4a Identified what we believe are the key strategy issues raised by the case study Outlined the strategic options open to Morrisons Evaluated the strategic decisions that could be made What We Have Not Done • Question-spotted what we think the Unit 4a examiner might ask. In any event. not the ones you want to be asked Repeated all the details of the case study (there is no value added in doing this and you need to read it too!) Repeated all your textbook.Morrisons and this Toolkit What We Have Done • • • • • • • Worked carefully through the case study – like you should too Analysed the data. VLE and revision notes on corporate strategy (refer back to these as necessary) Provided lots of notes on corporate strategy concepts – your textbook.

Read our sections on the Analysis of Morrison’s Business and our thoughts on the Strategic Options for Morrisons Summarise the key points from this presentation in your own revision notes (or scribble all over it) so that you are fully prepared for the Unit 4a paper tutor2u Step 1 Step 2 Step 3 Step 4 Step 5 . Read our advice on “Thinking Strategically” Go back to the case study and re-read it. Try to identify what you think are the key strategic issues. study the words. look at all seven pieces of Evidence (A to G).How to Work Through This Presentation Read the Morrisons case study carefully. form your initial views on the business – positive and negative.

Thinking Strategically tutor2u .

Food for thought… tutor2u . Your role now is to choose from the menu of options to help Morrisons navigate the intensely competitive world of supermarket retailing. the new Chief Executive. who replaced Marc Bolland in January 2010 Your business lunch will probably come from Market Street.Thinking strategically means imagining YOU are sitting at the Morrisons boardroom table in Bradford with Dalton Philips. possibly organic. hopefully fresh.

Directors do not concern themselves with day-today operational details – neither should you Dalton Philips is concerned with questions like… What is our business mission? What are our goals and objectives? How are we doing? Can we survive with our current strategy? What strengths and weaknesses do we have? What are our competitors doing? What resources do we need? How should we finance them? Are the same actions in the best interests of all the stakeholders? What external factors influence our business? How do we exploit the opportunities available? Think about these questions as you work through the case study tutor2u .

Corporate Strategy involves taking decisions • Decisions often need to be taken quickly • Decisions involve risk – but a business can never move forward unless it takes risks • Information is never perfect. complete or always up-to-date • The Unit 4a evidence needs to be considered in detail and data must be interpreted with a critical eye • Think about the decisions that Dalton Philips needs to take. What information does he need? tutor2u .

Be careful with your SWOT Analysis – don’t believe management hype! Strengths …these are ONLY factors where a business has a real competitive advantage. Your job is to tell it as you see it. Some don’t have any. Most businesses have some fundamental weaknesses – but management often ignore them (and rarely admit them). tutor2u . Just being good at something is NOT a strength if your competitors are good at it too! Most businesses have only a few strengths. Weaknesses …in reality. these are the things that really stop a business from succeeding.

problems or challenges facing Morrisons.All businesses have problems – but they are rarely as bad as they look Not every problem or issue described in the Morrisons case study is really important. Don’t get too bogged down by what look like numerous issues. Good management is about sorting things out Try to identify the really important issues. These are the strategic challenges that the company must address tutor2u .

Strategic Analysis of Morrisons tutor2u .

giving the market the characteristics of an oligopoly. which makes it the third most essential item of household spending behind housing costs and transport costs • 49p out of every £1 in retail spending is on groceries Market Structure • Supermarkets contribute over 3% of the FTSE 100 Index by market capitalisation • The “Top 4” of Tesco. fewer consumers are eating out which has prompted a rise in sales of ‘cook at home’ ranges tutor2u . tough economic climate.Market Overview: Supermarkets Market Size • The UK grocery market is worth £97B • The market is growing fast at 20-25% pa by volume • 12. J Sainsbury and Morrison have a 79% market share between them.8% of consumer income is spent on groceries. The three key buying criteria in the market are – – – Price (value for money) Convenience (location) Freshness (quality) • During the current. Asda. • It is hard for new players to enter the market and most growth has come from organic development of new stores or from consolidation through competitor acquisitions Customers • Supermarket retailing is all about reacting to markets and understanding what consumers want.

500 stores in the UK with a range of shopping formats including Tesco Extra.uk J Sainsbury Plc. giving it a total of 566 stores. Asda’s business is more focused on hypermarkets and out-of-town stores than the other UK chains. www.co. Tesco Homplus.asda. The supermarket chain bills itself as focusing on quality rather than price. Tesco Superstore.Tesco. In the model of Wal-Mart. The UK's largest and most successful supermarket chain. Its market share is currently 17% and it is in the process of buying the Netto chain’s 193 outlets for £778M which will push its share of the market up further. Sainsburys has a good image in the UK and is seen as a more upmarket supermarket than Tesco and Asda.co.com Asda Group Ltd. with a market share of 31%. Like Tescos. It has an online business. The range of stores has strengthened the company's ability to cater for 'top up solutions' as well as the weekly family shop.uk tutor2u • • • . Tesco also has a growing international presence in Europe.The Volume Competitors Tesco Plc. the US retail giant which bought it in 1999. America and China and an extensive range of non food items available both in store and online. It has 537 superstores and a further 335 convenience stores and a market share of 16%. Tesco Metro. www. Asda has a strong non food range. Asda has specialised in bulk selling at low prices since it was established in 1965. Tesco operates 2. It cannot expand further in the UK by acquisition due to Competition Commission rules on monopolies. One Stop and Tesco Express. www. a strong non food range and also runs a bank.sainsburys.

especially clothing. www.waitrose. It follows the European-based.co. www.co. In 2009 it purchased 51 stores from the failed Woolworths chain.coop • Lidl .lidl. Like Waitrose. Besides food sales it has a strong range of non food items. to make it the fifth largest supermarket in the UK . It has a market share of 2%.co-operative.marksandspencer.owned by the German company Schwarz it has about 500 stores in the UK. www.uk • The Co-operative Group – The Co-op has a total market share of around 8%.000 employees and. www. It differentiates itself through high quality food and customer service. It is the world’s largest community owned business with 4. it positions itself towards the up-market end of the grocery spectrum. www. it acquired Somerfield. It has 422 stores in the UK and a market share of 3%.com Marks & Spencer – M&S has over 700 stores in the UK. specialising in convenience stores and small supermarkets. It has about 700 locations and sells primarily frozen products. www.5M members and it is the UK’s largest community retailer.aldi.com • Iceland – owned by the Icelandic retail conglomerate.iceland. in 2009. It has a market share of about 1. Baugur. It has a grocery market share of less than 2%.Some Smaller and Niche Competitors Waitrose – owned by the John Lewis Partnership. Waitrose is an up-market supermarket chain that currently has 228 branches in the UK.uk • Aldi – another German owned UK price discounter owned by the Albrecht family (and named after the acronym ALbrecht DIscount). heavily price discounted format.com tutor2u • • .8%. It has 123. It has a market share of around 4%.

Budgens. Costcutter.Market Shares in the Supermarket Industry 35 30 25 20 15 10 5 0 Others includes Marks and Spencer. Spar etc tutor2u .

Tesco) Many of Morrisons rivals have developed strategies that are broader and more diversified than Morrisons’ core offer of food and groceries (plus fuel) tutor2u .g. Tesco.g. Sainsbury.g.Market Strategies seen in the industry so far Four strategic approaches (as defined in the Ansoff Matrix) have been deployed in this sector in order to generate sales growth: • Market Penetration in the UK – Building additional store space or extensions and growing organically – Acquiring competitors in order to raise market share (e. fuel. Tesco Express. financial services etc (e. electricals. Ocado) • Diversification into non food sales – Clothing.g. Asda. Co-op/Somerfield) • Market Development to access new customers in – Overseas markets (e.g. Sainsburys) • New Product Development – Online food sales and home delivery (e. M&S) – The convenience store sector (e.

Sir Ken Morrison announced his retirement from the business after more than half a century at the helm.A Brief History of the Development of Morrisons • • • • • • • In 1899. 100 years after its inception. The acquisition did not go smoothly. In 1967 it became a public limited company listed on the London Stock Exchange By the end of the 1980s. an egg and butter merchant. In 2008.000 sq ft. started Morrisons from a market stall in Bradford. his son and successor. The Safeway to Morrisons store conversion process was the largest of its kind in British retail history. the integration took time to take effect and profits fell. measuring 5. The family retains a 15% stake in the business In 2009 Morrisons acquired 35 ex-Somerfiield stores from the Co-op giving it an additional £400M of annual turnover tutor2u • • . Morrisons operated 46 stores across England . opened the first Morrisons self-service store in Bradford city centre In 1961 the first Morrisons supermarket was openend. His 55-year career had seen him transform his father’s small market stall into a £13 billion nationwide supermarket chain. Ken Morrison . William Morrison. All 479 Safeway stores across the UK were re-branded under the Morrisons name in a move which finally gave the retailer a national presence. Yorkshire In 1958. most of which were located in the North of England near the company’s Yorkshire base. By 1999. Morrisons had 100 stores In 2004 Morrisons acquired Safeway (nearly doubling its market share) to become the UK’s fourth largest supermarket with a greater presence in the South of England due to the location of many Safeway stores.

no member of the Morrison family is in an executive or board room role.000 employees 10 Million customers per week an annual turnover in excess of £15 Billion • • • Sales growth has outpaced larger rivals such as Tesco and Sainsburys in recent years It was named Retailer of the Year in both 2008 and 2009. and for the first time for 110 years. Today. It is the UK’s fourth largest supermarket and is in the top 50 FTSE index of UK companies by market capitalisation.morrisons. pie selling.co. now. Dalton Philips. www.uk tutor2u • • • .Morrisons Today • Wm Morrison Supermarkets PLC is a UK based company engaged in the business of food and grocery retailing. national organisation with broad appeal. a mix of the heritage and tradition handed down from William and Ken Morrison coupled with today’s modern professionalism injected by the new chief executives Marc Bolland and. It has: – – – – 425 stores 131. traditional Northern retailer to a more professional. Morrisons has transformed from a budget. Morrisons has a unique culture.

5M sq feet of space). It aims to: Move from ‘national’ to ‘nationwide’ by opening more stores across the UK Add 60 stores over the next three years (1. bacon. Fresh – owning its vertically integrated supply chain and selling food that is freshly prepared in store. owning abattoirs. – – – 2. sausages (own pie and sausage factory) Food is fresher because it comes in faster with no middlemen and no warehouses. meat and cheese processing plants and bakeries. It delivers this by: Strong promotional offers Offering a range of products from ‘Value’ to ‘Premium’ Service – having the right product availability (because they own the distribution network) and excellent customer service. – – 3. All of this helps the business to achieve its number one vision . – – • The strategy could be summarised as “fresh food at low prices”. It is the most vertically integrated food retailer in Britain. It is the only UK supermarket to: Slaughter its own meat (own abattoirs) Run its own bakeries – bread and sandwiches (own bakers) Produce its own cheese. with the Morrisons mantra being “fresh and value” Morrisons could be described as having a food offering with broad appeal from Aldi to Waitrose tutor2u .to be the food specialist for everyone. Value – keeping costs low and offering great value across the product range.Morrisons’ Current Corporate Strategy • • Morrisons’ Vision is “To be food specialist for everyone” Its three brand values are 1. fruit and vegetable pack houses.

Heinz) Morrisons is different from other supermarkets because it owns and control its supply chain.800 trailers 425 Stores across the UK Including in store bakeries. fishmongers. This means that Morrisons are closer to source by ‘cutting out the middleman’. butchers etc Customers Brands sourced From other manufacturers (e.g.Morrisons Business Model: A vertically integrated approach which is different from other supermarkets Sourcing & Selection 100% British beef. tutor2u . poultry 100% sustainable fresh fish 100% own brand Bristish free range eggs Regional milk from farms close to stores 12 distribution 12 distribution centres centres Production Distribution Market Street Ownership of 3 bakeries 6 food & veg packhouses 1 food prep factory 3 abattoirs Own fleet of 700 tractor units & 1. The advantages of this business model are: • customers get great value for money and fresh food at great prices • Morrisons can react earlier to consumer trends and bring seasonal food in-store quicker than other supermarkets. pork. lamb.

Morrisons claims to have the quickest turnaround time between order and delivery compared with any other supermarket • • • faster reaction to customer trends throughout the day. security of supply is achieved food miles close tare reduced because many facilities are situated o distribution centres • Distribution Ownership and operation of a very modern transport fleet means: Market Street Preparing food instore means: ensures speed and freshness and cost control. products are freshly made.Rationale Behind Morrison’s Business Model Sourcing & Selection Being closer to source and working closely with farmers/producers means: • better control of the provenance and quality of food development of a cost relationship that is reasonable and fair to all parties sustainable and responsible sourcing to help the environment • Production Owning the manufacturing facilities and producing in-house means that: supply chain lead times are reduced which maximises the freshness in-store and reduces waste and costs. achieving cost efficiency and keeping prices low. • • • • • tutor2u . producing only what the customer wants reducing waste from over production.

The first livestock are Shorthorn and Angus cattle. Morrisons has just opened its own 700 acre farm in Scotland • The supermarket has teamed up with the Scottish Agricultural College to open the farm at Dumfries House in East Ayrshire • Both Morrisons and the agricultural college hope that the farm will become a "centre of excellence". . carrying out research and developing best practice for the industry and making a contribution to helping the long-term sustainability of British farming. tutor2u .holding company • Safeway Overseas Limited . • The farm rears traditional cattle and sheep breeds. Morrisons hopes to open a second research farm in south-east England later this year.baker (acquired in 2005) • Farock Insurance Company Limited .manufacturer and distributor • Neerock Limited .Morrisons ownership of its supply chain includes some newly acquired firms Wholly-owned subsidiaries of Wm Morrison Supermarkets PLC • Bos Brothers Fruit and Vegetables BV .produce wholesaler • Wm Morrison Produce Limited .produce packer • Farmers Boy Limited.grocery retailer Safeway Stores Limited -grocery retailer • In addition.captive insurer • Safeway Overseas Limited .fresh meat processor • Rathbone Kear Limited .

Morrisons’ ability to compete successfully with other supermarkets will be affected by the company’s strengths and weaknesses Marketing Key Strategy Question: Operations What are Morrisons’ Strengths. Weaknesses and Issues in its four main business activities? Human Resources Finance tutor2u .

We stress that our offer is for everyone. fishmongers and bakers than our competitors. Morrisons is different from other supermarkets because it: • • Owns its supply chain. where it is cut in store by trained butchers • Produces 1. burgers and sausage rolls are made in its meat processing plant.700 fresh lines of food in stores everyday “ We emphasise our deep understanding of food: through being closer to source than other retailers. through the amount of food preparation undertaken in our stores and through the employment of more specialist butchers. because our great food is also always great value” (Morrisons Website) tutor2u . graded and packed in its own packing facilities – – three bakeries produce six million loaves. its own manufacturing sites and ‘Market Street’.MARKETING: Morrisons has a very clear Unique Selling Point Morrisons does not just compete on price. through our unique manufacturing and packing facilities. • Supplies direct to its stores through 12 distribution centres and using its own fleet which works around the clock to deliver the freshest food to stores – three abattoirs supply meat to the stores. Makes and packs its own fresh produce which is washed. rolls and muffins each week fresh meat products like pies.

MARKETING: There is a range of Products and Prices. Food Fusions. Morrisons introduced the new ‘From My Farm’ range. Food ranges include the basic Morrisons Value. It is currently launching a further 500 non-food. In 2008. dairy based products. Free From (foods for wheat. CDs and console games. fish and meat. alcoholic and non-alcoholic beverages. while sales of the Premium range “The Best” are up by 5%. Morrisons Organic. etc) and a wide range of DVDS. home-ware product lines to complement its food range Sales growth of the Value range have been up 50% in the last year. bakery items. gluten or dairy-free diets). Unlike its main rivals. but is it broad enough to be the food specialist for everyone? • • • • • • • About 80% of Morrisons revenue comes from the sale of food and groceries. following market research indicating that 74% of customers wanted opportunities to buy more regional produce in store. garden furniture. Eat Smart. with 20% coming from the sale of fuel/petrol A range products is available including green grocery. household brands from around the world. pharmaceuticals. Kids Smart. socks. This may reflect the trend for consumers to switch to lower priced products during the current tough economic times • But • Supermarket retailing is all about reacting to markets and understanding what consumers want. Morrisons has: – – – No online food and grocery business A very limited non food offer No loyalty card scheme to track customer trends and offer lapsed customer discounts tutor2u . and its Premium food range branded “The Best”. Products are sold under both Morrisons own brand label as well as renowned. tools and recipes. There has been a recent focus on improving the quality of ready meals as well as the fresh fruit and vegetables products Non-food products consist of some essential clothing (underwear.

Petrol stations are also a common feature of most stores. HSBC Bank outlets can also be found in a number of stores. with more conventional aisles in the centre. a pie shop. a Fresh to Go counter (for salads. deli and fish counters. including an exclusive credit card and savings account.e. there are not enough of them) – Morrisons has no convenience stores • Some customers dislike having to find a £1 coin (returnable) for using the supermarket trolleys tutor2u .MARKETING: Place – “Market Street” is a successful store format. • • • But • Morrisons’ market is limited because: – 35% of Britons (7 million households) live more than 15 minutes away from a Morrisons store (i. sandwiches. but are there enough of them? • Morrisons has built its reputation around a no-frills store format called Market Street . which offer a range of financial services. pizzas and pasta). a cake shop and a cafeteria. All stores feature a butcher's counter. The overall theme of its supermarkets is based on an early 20th century street setting in the north of England positioned around the edge of a store. bakery.

Asda and Sainsbury’s. The new campaign. swaps famous faces for inquisitive children visiting farms and butchers and asking questions about the origins of Morrisons’ fresh food. while appealing to consumers' wallets. Alan Hansen and Nick Hancock. Richard Hammond. • • • • Why the change? • It is partly a reaction to rival brands moving into its fresh food territory • Morrisons feels that children are “more believable” than highly paid celebrities • All advertising campaigns have a life cycle and require renewal tutor2u . Tesco. The advertisements are designed to show where fresh food comes from This first execution of the campaign aims to communicate the fact that Morrisons is the only supermarket to sell 100% British fresh meat and poultry. asking farmers and buyers questions about meat.MARKETING: Morrisons has recently changed its Promotional and TV advertising campaign to emphasise its usp and the business model • In 2007 Morrisons adopted a celebrity-led advertising campaign which became well known for featuring a host of famous faces including Denise van Outen. "Fresh choice for you". created by DLKW and launched this year. It will now use "Eat fresh. who explains how Morrisons is different to its main rivals. The children are then seen in-store with a butcher. Pay less" to promote its freshness message. The strategy also marks a change to the brand’s strapline. The ad shows school children on a trip to a farm.

spades. hosepipes. tutor2u • • • • • . food production and schools • Morrisons' promotional strategy also includes its Let's Grow voucher scheme. smocks. Let’s Grow ties into the National Curriculum and also supports the Government’s ‘Growing Schools’ initiative. soil testing kits. biodegradable pots. The initiative.and Sainsbury’s Active Kids initiative In 2009 it won the IPA Effectiveness Grand Prix.57 per £1 spent. sun hats and even a state of the art wormery (which enables Tiger worms to munch their way through garden and kitchen waste.2m of gardening equipment The scheme competes with Tesco’s Schools and Clubs scheme . Vouchers can then be redeemed for free gardening equipment for schools including seeds. having generated a claimed ROI of £21. encourages customers to collect vouchers in-store for every £10 they spend. producing a nutrient-rich compost for the garden The aim is to encourage children to grow their own fruit and vegetables and to link Morrisons with schools and freshness Over 20.000 schools have registered for the programme and Morrisons has given away over £3. hoes. which was launched in 2008.MARKETING: The ‘Let’s Grow’ voucher scheme is targeted at freshness.

making sandwiches in-store.g. with plans for a second farm in the East of England • Morrisons Farm at Dumfries House is a research farm on a 700-acre site on the Dumfries House Estate in East Ayrshire.OPERATIONS: Morrison is a producer as well as a retailer. with support of the • National Farmers Union of Scotland. It is intended that the farm will become become one of the leading centres of excellence for applied farming research. Morrisons work in a joint venture partnership with the Scottish Agricultural College.g. • It is a ground-breaking joint venture to help improve the efficiency and sustainability of British farming. bread rolls. • Owning the means of production (and distribution – see next slide) helps to secure continuity in the supply chain But • Will a strategy of farm ownership give Morrisons a competitive advantage? – – Tied monopolies lose the imperative to be efficient if they have a ‘guaranteed’ customer Would it be better to play the (spot) markets for produce? tutor2u . achieving a cumulative reduction of 17% since 2006.886 tonnes. Morrisons owns a farm in Scotland. preparing packaged salads in-store Batch production – e. but how much of an advantage is it to own their means of production? Production Morrisons engages in at least two types of production: • Just in time production – e. tuna steaks • • In 2009 Morrisons reduced the volume of waste sent to landfill by 2.

IT and logistics.000 new jobs. Morrisons owns and maintains – – – 12 distribution centres 700 tractor units 1. For example: – – The packing house at Flaxby. not just a national operator so that it can generate bigger economies of scale. bringing efficiency improvements A new purpose-built distribution centre was opened at Sittingbourne last year supplying stores in London and the South East. • But • In order to be competitive with Tesco. but needs to become a nationwide operator to achieve further cost reductions and economies of scale Distribution and Packing • In order to distribute products. thereby reducing its average unit costs tutor2u .OPERATIONS: Morrisons distributes on a national scale. It reduces the distance that the fleet travels by around 20m km every year and has created around 1.9 Million trays of loose fruit are packed and 18 Million cases are delivered to stores each week Morrisons has invested heavily in its distribution infrastructure. has been extended and refurbished in the last year. Morrisons needs to become a nationwide operator (with a greater presence in the South of England). North Yorkshire.800 trailers • 1.

beef and poultry farmers. This means that the milk has not travelled far and it stays fresh. it shares and increases knowledge and understanding across the supply chain. Through the producer groups. and helping to secure the long term viability of British farming. Education Morrisons has established producer groups for dairy. driving up quality and efficiency. Education and Training Quality • In order to provide the very best fresh produce at great value Morrisons has a regional sourcing policy. Training • The Morrisons Fresh Food Training Academy gives all Market Street colleagues a nationally recognised qualification in Retail Skills. to develop closer links • with those farmers. • Morrisons is committed to an approach of 100% British quality.OPERATIONS: Product Quality. – – In 2007 it was the first of the top four supermarket chains to commit to selling 100% British fresh meat throughout the year In 2008 it extended its commitment to and support for British farmers by ensuring all own-brand fresh milk was sourced regionally from farms that are in the same area as the Morrisons store that sells the milk. • Morrisons also has a seasonal sourcing policy whereby products available in-store change with the seasons. For example it sells Scottish and Welsh own-label fresh milk. (see HR section) tutor2u .

To attract. motivate and develop skilled people to ensure that Morrisons becomes the food specialist for everyone. such as the ‘Leading the Morrisons Way’ programme are in place to ensure that leaders of the future have a good chance to succeed within the unique culture of Morrisons • Wherever possible Morrisons looks to develop people from within the business to meet the growing demands of supermarket retailing tutor2u . The HR strategy is: – – People are our most valuable asset and our success relies on our people delivering great service to our customers each and every day. one team. bringing the best out of people. great selling and service and fresh thinking.000 people are employed in the UK which makes it a significant employer. • There is a company wide education programme for all employees in the form of interactive Vision and Values workshops to integrate core values into every day behaviours at Morrisons. Values • Values define what Morrisons expects from employees and what customers can expect as well.HUMAN RESOURCES: Morrisons integrates its core values within its HR strategy and culture Strategy • 131. Leadership • Leadership development initiatives. great shopkeeping. These include a can do approach.

make sure that you distinguish between different types of job/employees because not all workers will be affected in the same way by Morrisons’ various HR strategies tutor2u .HUMAN RESOURCES: Morrisons offers a variety of jobs for a range of talents from school leavers to graduates to experienced people Head Office • Finance • IT • Marketing • Merchandising • Human Resources • Property and Development • Retail Operations • Security • Supply Chain Management • Trading / Buying Regional • Logistics • Manufacturing • Engineering • Regional / General Management Stores • Store Manager • Deputy Store manager • Duty Night Manager • Baker • Butcher • Pharmacist • Greengrocer • Fishmonger • Check out / cashier • Shelf stacker • Customer services • Cleaners When answering questions in the A2 examination.

National advertising has raised the profile of Morrisons as an employer. redefined Morrisons’ approach to attracting and recruiting fresh talent into the business.HUMAN RESOURCES: Morrisons’s growth has meant they have been able to create and recruit new jobs despite the recent. • Every new employee experiences the Vision and Values programme as part of their induction.iwantafreshstart. allows candidates to apply online for careers at Morrisons. tutor2u .700 new jobs were created through organic growth. fishmongery and bakery The ‘I Want a Fresh Start’ campaign. launched in 2008. – As part of the conversion of these stores to the Morrisons format. • 2. tough economic times in the UK • • • Workforce numbers have risen from 124. all of these colleagues have undergone training in core values of customer service and the fresh food offer. – – A new dedicated recruitment website. www.000 in the last year or so 4.000 to 131.com.300 colleagues formerly employed by the Co-operative Group or Somerfield have joined through acquisition growth. many in butchery. evidenced by the high interest and number of applications for management positions in particular and the appointment of 50 key retail managers.

freshly prepared. These skills help – – people build a career and Morrisons further increase the quality. This initiative reflects current trends in retail training. • The Fresh is Best programme focuses on engaging and training managers to deliver readily available. Morrisons launched The Fresh Food Training Academy to strengthen its position as the UK’s leading proponent of retail craft food skills. greengrocers and fishmongers. butchers. value and service provided to customers.HUMAN RESOURCES: Morrisons spends significant time and money on its quality training and development programme • In 2009.000 Morrisons’ staff graduated with Edexcel’s Level 2 (formerly NVQ) Diplomas in Retail Skills from the supermarket’s Training Academy. well presented. • • tutor2u . Managers are increasing their skills too. quality products. thereby becoming officially qualified as bakers. In July 2010 more than 24. compared with only 20% in 2002. The number of retail workers across the sector with no recognised qualification has dropped from 17% in 2002 to 11% in 2010. whilst maintaining standards. with 31% having level 4 or higher standard qualifications in 2010. reducing wastage and giving great selling and service.

RAC. Kwik Fit etc * after qualifying period (in order to generate employee loyalty) Morrisons’ staff have been recognised for their achievements with prestigious industry awards including Retail Week’s ‘Retailer of the Year’ for the last two years and The Grocer’s Service and Availability awards. Thomas Cook. tutor2u . nights out) • Fundraising events for the Charity of the Year • Excellent training • Career development • Subsidised staff canteen • Opportunity to join stakeholder pension scheme • Opportunity to join the Share Save scheme • Health car cash plans • Premium payments for working on Sundays • Discounts with APH.g. Theatre trips. Christmas parties.HUMAN RESOURCES: Morrisons offers a range of extrinsic and intrinsic rewards to support the motivation of their workforce Extrinsic • Competitive rates of pay • 10% staff discount • Free Life Assurance • Staff Profit share and Management Bonus Plan* • 29 days paid holiday • Service award* – – – – 5 years = £125 10 years = £250 15 years = £375 20 years = £500 Intrinsic • Social Committees (e.

HUMAN RESOURCES: Continuous communication and employee engagement is an important component of the HR strategy • In November 2008. The Climate Survey conducted at the end of 2008 covered workers across all areas of the business. team environment and management. • • tutor2u . These are five minute. ensuring that everyone feels a part of the challenges and successes of the organisation. All employees participate in either the Profit Share Scheme or Management Bonus Plan. face-to-face monthly departmental briefings based on messages cascaded down through the business. Workers are encouraged to ask questions and provide feedback on the topics covered. Morrisons launched “Gimme 5” briefings to strengthen its communication lines and to create a more committed and productive workplace. Employees are encouraged to give their opinions through the Climate Surveys. starting with the Chief Executive. seeking opinion on a range of areas such as job satisfaction.

but is it all good news within HR? You need to treat the evidence critically.g.HUMAN RESOURCES: .. training and development programme? tutor2u ... university students. cleaner. those who would rather be working somewhere else) • Although Morrisons trains and develops leaders from ‘within’.a.. cashier. the last two Chief Executives (Bolland and Philips) have both been recruited from outside the business – Is this a vindication of the leadership. This means that – Return on costs of training and development are ‘lost’ – Costs of recruitment and replacement are incurred – Not everyone is proud to work for Morrisons • Several jobs at Morrisons are not great jobs and they do not attract great pay (e. warehouse worker) – There is a transient workforce for these jobs where people are not in the business for the medium to long term (e. • The employee turnover rate is 22% p.g. Only 33% of employees remain with the company for at least five years. shelf stacker.

062 65 -224 4 907 -49 858 -260 598 2009 14.969 12.528 13.9% 4.615 913 37 -281 2 671 -16 655 -195 460 612 -58 554 31% 33% 30% 7% 236% -17% 2008 12.151 818 30 -268 32 612 35% 10% 5.6%).3%Gross Profit Margin Profitability Ratios 2010 2009 2008 • Sales revenues are up year on year reflecting strong top line sales growth • Gross Profit margins are up 10% in 2010 showing tight control of Cost of Sales • Net Profit margins are up 27% in 2010 showing very tight control of overheads and expenses • Profit After Tax is up 30% in 2010 which is an excellent year on year improvement But • Although Net Profit margins are higher than Sainsbury (3.410 14.FINANCE: An analysis of the Profit & Loss Account shows a healthy level of profitability and good cost control Profit and Loss Account £M's Turnover Cost of Sales Gross Profit Other operating income Admin expenses / overheads Property transactions Operating Profit (Net Profit) Finance Income/Interest Profit before Tax Taxation Profit after Tax 2010 15. they are slightly lower than Tesco (6.6% 4.0%) tutor2u .9% 6.7%Net Profit Margin -20% 5% % Change 2009-10 2008-9 6% 5% 16% 12% 12% 12% 6.348 1.3% 6.

Acquisition of Safeway in 2004 – e.00 in last 12 months • As a public limited company.5 Billion • The share price has fluctuated between £2.g. it can raise significant sums of money through the sale of shares and/or through borrowing in order to expand – e.FINANCE: Morrisons has not been shy to invest money in acquisitions and store expansions • Morrisons is a top 50 UK company by market capitalisation • Analysts value the property. plant and equipment portfolio at about £7. Acquisition of Somerfield stores from Co-op in 2009 • Profits in 2009 were impacted by Summerfield/Co-op store integration • Morrisons made charitable donations of £1.g.18M last year tutor2u .60 and £3.

8 4.2 0.8 12 15.53 0.3 • • But • Although the PE ratio (an indication of future growth) is higher than J Sainsbury. given that the opportunity cost of investing the same money in the bank is about 4% A strong dividend has been paid to shareholders in the last three years.3p) • Morrisons current and quick ratios are low and may reflect short term liquidity issues The low gearing ratio (Debt to Equity) is the strongest in the supermarket sector and means that Morrisons could borrow money in order to expand.3 20. especially in 2010 tutor2u .FINANCE: Morrisons key ratios show real financial strength. although it must be careful about short term liquidity 2010 Current ratio Quick ratio Gearing ratio (%) Earnings per Share (p) Dividend per share (p) ROCE (%) P/E ratio (times) • 2009 0.6 2008 0.24 20.8 12 15.25 24.4p).0 22.28 27.51 0. it is lower than Tesco • Although EPS is higher than Sainsbury (16. it is lower than Tesco (27.2 13 14.8 8.4 5. especially given that interest rates are currently quite low and look set to stay low for some time Morrisons owns about 90% of its store portfoilio ROCE is healthy.1 17.49 0.

Summary of Morrisons’ Strengths and Weaknesses Strengths Marketing Strong USP: Fresh. own manufacturing sites and Market Street Own training academy Staff turnover Human Resources Finance Low gearing Good sales turnover growth Rising net profit margin Current ratio and Quick ratio are both quite low EPS and Net Profit Margins are lower than Tesco tutor2u . pack and supply direct to stores Own supply chain. Value and Service New promotional message Weaknesses No convenience stores No online product range Limited non food offering Operations Local sourcing through British farmers and National rather than producers nationwide coverage limits economies of scale Produce.

There are several external influences outside Morrison’s control which create opportunities and threats

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Political (and Legal)
• UK and EU legislation is applied to UK food retailers covering issues such as planning, licensing, pricing, competition and customer protection (e.g. Planning Policy Guidance, Competition Commission and Food Standards Act 1999) 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 The Food Standards Agency is an independent watchdog established to protect the public's health and consumer interests in relation to food safety. Food hygiene is monitored by the Environmental Health Department

• •

Opportunities • Reduced fat in foods • Food miles labelling and carbon footprint • Better relationships with National Farmers Union Threats • A significant number of people, such as farmers and countryside groups, oppose the dominance of the supermarket multiples • 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 Competition Commission rules make it hard for supermarkets to acquire their competitors due to the • possibility that local monopolies will be created
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Economic
Opportunities • Grocery sector is less prone to fluctuations in the economy because people need to eat
– During recession people might eat out less and eat in more which has allowed retailers like M&S to target promotions such as “eat in for two for £10”

• During recession, customers tend to switch to ‘Value’ brands rather than ‘Premium’ brands . Threats • Banks are reluctant to lend in the current economic climate which could make it hard to raise money for the store expansion programme

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especially organic foods. Threats • There are strong doubts about the safety and ethics of genetically modified (GM) food tutor2u .Social (and Environmantal) Opportunities • Consumers have increasingly exotic tastes and desire variety. although there remains a strong “junk food” market • Sales from convenience stores are increasing rapidly because they are easy to access. choice and value • UK consumers spend around 3% of their waking lives in supermarkets and are increasingly willing to make purchases of non-food items such as clothes. and electricals through one stop shopping at supermarkets • ¾ of people travel by car when they go shopping • People are becoming more concerned about healthy eating. People tend to buy luxury food or ‘top ups’ from them • Shoppers like to buy “Green” food and are becoming more aware of packaging waste and its disposal • The environment and ethically friendly image of companies is welcomed by consumers.

speed up delivery and facilitate storage management Threats • The popularity of mobile/laptop computing and wifi has encouraged a trend in virtual shopping and online retailing and has become a new method for communicating with and targeting consumers.000 grocery items including branded products from Pampers. • Amazon has just launched a new grocery section so customers can put paperbacks together with pasta and pork chops in the same virtual shopping basket – – – Specialising in gluten-free cereals. imported delicacies like stuffed vine leaves and Italian biscuits Targeting bulk buyers – ‘steak lover pack’ £57. This could substantially change the ‘physical’ shopping model of the future. organic jam.Technological Opportunities • The application of increasingly sophisticated IT systems for logistics management can help supermarkets to optimize their supply chains. Dolmio. Kraft and Walkers tutor2u . Uncle Ben’s Ariel.15 for 16 steaks 22.

organic.SWOT Analysis – A Summary Strengths • Strong USP • Ownership of supply chain • Healthy financial position Weaknesses • Need for nationwide coverage • No convenience stores • No online business Opportunities • Green. ethical products • Food miles and carbon offset Threats • Competition Commission • Online retailing tutor2u .

Primark could move from clothes to food (discounter) Organisations such as the Post Office or milk companies could offer a grocery home delivery service tutor2u . always looking for value • • Threat of New Entrants (Medium/Low) Due to the high economies of scale. especially without a loyalty card Many products are very similar in different supermarkets Sensitive to price changes at the volume end. Carrefour (world’s second largest retailer) could enter. purchasing power Reasonably easy for supermarkets to switch suppliers Some protection from authorities and pressure groups • • • • Rivalry of Industry Competitors (Medium/High) Some characteristics of an oligopoly Some product and branding differences.Strategic Analysis: Michael Porter’s Five Forces Model • Threats of Substitution (Low) As more supermarkets move to the convenience sector. it is hard to enter. but many products are the same Steady industry growth Medium/High exit barriers • • • • Customer Power (High) Easy to switch. this threat diminishes Grow your own fruit and veg? Development of drink/tablet replacements for food? • • • • • • • Supplier Power (Low) Numerous. strong learning curve effect and large capital requirements. diluted suppliers High threat of vertical integration Limited volume.

Key Strategy Issue: To what extent does Morrisons achieve its vision? tutor2u .

is not a fresh product and it is not a food product. wheat/gluten free) • Everyone . kosher. Morrisons is also perceived to be good value by its customers. health foods. • Specialist . • Fresh food .petrol/fuel.lots of people can’t easily access a Morrisons supermarket because they have no convenience stores. no online shopping. However. quality and freshness of the food they buy.there are other niche food organisations who could claim to be more ‘specialist’ than Morrisons in certain segments (e. indian/thai/polish. no overseas stores tutor2u .g. vegan. which accounts for 20% of Morrisons’ total turnover. no presence at motorway service areas. Morrisons does achieve its vision. the following strategic questions can be discussed. especially given that customers have an increasing focus on the provenance.Is Morrisons a fresh and value food specialist for everyone? • In many ways.

Key Strategy Issue: Does Morrisons look a bit like Tescos did ten years ago? tutor2u .

its strategy has been predominately based on selling groceries at low prices and doing so from large stores only • It has not expanded into the convenience store market • Morrisons is the only one of the big four supermarket groups which does not offer its customers an online shopping service • Morrisons has not developed the ‘one stop’ model and has only a very limited range of non food items by comparison with shops? • Morrisons has not expanded into overseas markets • Morrisons needs to consider whether its current strategy is right or whether it needs to change and copy its main rivals in one or more of the strategies outlined above tutor2u .Morrisons needs to consider its current market penetration strategy and whether it should expand in other ways • Morrisons has expanded by acquisition and through organic growth in the food and grocery sector • In contrast to the other major UK supermarket groups.

Key Strategy Issue: Should Morrisons construct a new store on the basis of the information in Evidence D? tutor2u .

• tutor2u . They are an essential managerial planning tool.The proposed store construction can be evaluated by drawing a network diagram and assessing the critical path • Evidence D gives some information about a potential store construction in the Southern Counties including: – – – Activity Duration Dependencies • This is sufficient information to enable the development of a network diagram Network diagrams and critical path analysis are used by businesses to plan and deliver potentially complex operations and projects. enabling managers to allocate resources in the most appropriate manner and to manage the most critical activities that are likely to cause delay to the operation or project.

The network diagram shows that the proposed store construction will take 51 weeks H 8 A 0 1 0 6 4 2 B 8 Key A Foundations B Drainage C Erect steel frame D Brickwork and blockwork E Roof structure 6 I 2 9 44 44 K 4 9 J 7 C 8 8 2 13 23 3 23 E 9 32 32 F 4 4 36 5 36 G 5 14 38 7 47 8 51 51 D 15 F External window and doors G Internal floor tiling H Ceilings I Joinery and internal doors J Decoration K Fixtures and fittings Critical path 6 Duration 4 Float tutor2u .

And remember it is only a proposal at this stage Business Planning Considerations • The project is for a store in the Southern Counties which is an areas where Morrisons needs to increase its presence. such as drainage. the construction schedule has no • activity for snagging faults and Morrisons would need to add time for staff training. These would need to be understood before • undertaking the project and the targeted Return on Investment would need to be agreed • Does Morrisons have a criterion level (desired return / hurdle rate) for its investment projects and how would this project stack up against that level? • What other investment projects is this one up against and how high does it rank against these projects? • Does Morrisons have the necessary financial capital to invest in the project (it probably does!) tutor2u . • Activities where there is ‘float’ (e. would need to be carefully managed since any slippage will result in a delay to the project. erection of steel frame) give the project managers the opportunity to negotiate with suppliers over timescales – it might be cheaper to wait a couple of weeks for the frame if the supplier can do it more cheaply at that time • Questions need to be posed about the reliability of the assumptions for activity duration and dependencies. so it may be a well chosen location • We would need to assume that Morrisons has done appropriate market research into the site and the target market. For example.Some conclusions and questions arise from the network diagram. including analysis of competitor stores in the locality • How confident are the Morrison directors about the growth of their market in the medium term? • Do the Morrison directors regard this project as a high. • Morrisons could incentivise the building contractors to complete the project in less than 51 weeks so that they could begin trading earlier and they may want to impose financial penalties for late completion against the agreed plan • Activities on the critical path. the marketing launch etc. medium or low risk investment? Project Planning Considerations By no means all of the activities required to open the store are listed.g. who produced them and how good is their track record of project planning for new store builds? Financial Planning Considerations No costs or revenues have been estimated for this construction project.

but beware. The advantages of Network Diagrams and CPA are that they: • Provide decision makers with a picture of a problem. dependencies) • Can become unwieldy or over complicated for extremely large projects • Do not guarantee the success of a project or activity – management still need to manage and implement the plan.Network Diagrams: They are useful to some extent. so it easier to interpret • Encourage forward planning of all activities. labour and capital equipment can be ordered/delivered ‘just in time’ rather than tying up working capital • Enable managers to focus on the critical path to ensure that the Project/Programme is successfully delivered But The concerns with using Network Diagrams are that they: • Depend upon the accuracy of the planning assumptions (e..g.when using a Network Diagram it is important: • To adopt a realistic view of timescales and effort required • Not to delete agreed activities in order to ‘speed up’ the process • Not to accept that an activity is complete if it is only 90% done • Not to change the target dates without a very good reason tutor2u .. rather than planning ‘on the fly’ • Help to reduce the time lost between activities so projects can be run efficiently and lead times reduced • Assist in the management and allocation of resources • Improve production efficiency because materials. durations of activities. deal with delays and cope with the unexpected Remember .

Key Strategy Issue: To what extent does Morrisons achieve Corporate Social Responsibility? tutor2u .

• Filling station pumps have been converted to highly efficient ‘vapour recovery’ pumps which emit much reduced levels of fuel vapour into the atmosphere. This was a £16m investment in improved environmental performance • In June 2008. Carrier bag consumption has been reduced by 71 million bags. it highlights that tomatoes are best kept at room temperature and apples in the fridge – the reverse of how most consumers store them But • People have to drive to Morrisons stores. Less Waste’ programme helps educate customers and the general public in better food management It provides easy.Morrisons is firmly committed to achieving CSR. The accreditation scheme is the world’s first carbon award requiring an organisation to measure. it was among the first of only 12 companies to receive the prestigious new Carbon Trust Standard for reducing carbon emissions. balanced lifestyles • The ‘Let’s Grow’ programme supports education. Customers were encouraged to use the bags on every shop. practical tips to improve the storage of food and dispels some myths.taking good care of our shoppers. our colleagues and their communities to give healthy. This is at odds with a healthy lifestyle and reduced Carbon Footprint Business .taking good care as we go about our business from sourcing to supply to engagement with stakeholders • Local sourcing policy helps them achieve this tutor2u . The CSR programme is structured around three principal areas: Environment . carbon. manage and reduce its Carbon Footprint and make real reductions year-on-year. It’s philosophy is that by taking good care of what we do today. we can make a real difference for tomorrow. schools and growing fresh food • The ‘Great Taste. Morrisons’ Carbon Footprint has been cut by 36% since 2005 But • Morrisons still use plastic bags which take hundreds of years to biodegrade • Morrisons sells fossil fuels which are bad for the environment Society . but there are some difficulties with their approach? • • Morrisons has a stated commitment to act sustainably and to protect and nurture the valuable resources on which we all depend. For example. waste and sustainability • In May and December 2008 Morrisons gave away 10 million reusable bags (one for each customer) made from 100% recycled material and larger than standard bags.taking good care of the planet.

the new Chief Executive tutor2u .Key Strategy Issue: Morrisons’ success will be affected by its corporate culture and the ambitions of Dalton Philips.

businesslike approach This approach was needed because of the difficulties experienced during the Safeway integration and the need to be responsive to customer trends in a competitive environment The new approach was started by Marc Bolland (who has moved on to become Chief Executive at M&S) and is being continued by Dalton Philips. TV advertisements sold pies.Morrisons culture is changing • Morrisons has its origins as a budget. it has been through a cultural integration programme and opened up access to the market in the South of England For over 100 years. replacing the Power culture of the past tutor2u . Morrisons has operated under the characteristics of a Power culture (as defined by Charles Handy) under the leadership of the Morrison family Sir Ken Morrison has stepped down after 50 years and for the first time ever there is no member of the Morrison family in an executive or board role As it moves from a national to a nationwide organisation. cut price packets of crisps and showed smiling butchers • • • • • • • Having acquired Safeway. a former Walmart executive who was recruited from the Canadian food distributor Loblaw Morrisons culture is therefore becoming more of a Role/Task culture. process driven. pie selling traditional Northern retailer – 10 years ago. Morrisons is adopting an increasingly professional.

But is it possible to evaluate some of the options tutor2u .Health warning for Morrisons There is a limited amount of evidence in the case study so it is difficult to develop a water-tight corporate strategy.

Strategic Options for Morrisons tutor2u .

proprietary knowledge.The work of Michael Porter: Morrisons’ strategy needs to reflect its competitive advantage • Resource advantage – firm specific assets that the competition cannot easily acquire such as patents. creativity and quality of processes Cost advantage – productivity of labour/assets and buying power for raw materials Differentiation advantage – ability to add value by offering (unique) product benefits Morrisons has some competitive advantage from owning elements of its supply chain Morrisons has a competitive advantage from its Training Academy – Retail Skills Morrisons has no discernible competitive advantage on cost and may have a disadvantage on economies of scale Morrisons has competitive advantage through its ability to produce fresh products in-store tutor2u • • • . brand identity Capability advantage – skills and competencies. installed customer base. trade marks. reputation. innovation.

personal service.Porter identified three generic strategies against which Morrisons can be evaluated Generic Strategy Cost Leadership Differentiation What does it mean? Unit costs are lower than competitors because of economies of scale. but customers are prepared to pay a premium for quality and individualised products Avoidance of confrontation with competitors (cost leaders and differentiators) by developing niche positions with products for otherwise unsatisfied customers What is required? Up front investment in gaining market share followed by running a very tight ship Finding perceived product characteristics and uniqueness that add value Finding markets that large companies cannot easily replicate (e. hard-to-imitate products) Yes Maybe Focus No tutor2u . market share is less important.g. Unit costs may be higher. super fast delivery. good production processes and efficient resource allocation Winning profitable segments of the market.

Applying Porter’s Strategy Matrix to Morrisons indicates that a Cost Leadership strategy is appropriate Broad (market-wide) Cost leadership strategy Differentiation strategy Competitive Scope Morrisons Narrow (market segment) Focus strategy (low cost) Low Cost Focus strategy (differentiation) Differentiated (product uniqueness) Competitive Advantage tutor2u .

Expansion: there are a variety of ways in which Morrisons can deliver this strategy… Strategic tools • There are several tools available to identify strategic options for growth • These centre on the approach the business might take to its products and markets and whether growth should be “organic” or by “acquisition” Evaluation • The evaluation of strategic options should take into account Morrisons’: – – – – – Aims and objectives Physical. their views and interests tutor2u . Stability: this could apply to Morrisons. but they have decided that it is a strategic imperative to continue to grow through increasing shop floor space in the UK 3. human and financial resources Management structure and skills Culture Key stakeholders and shareholders. Retrenchment: this is not applicable to Morrisons 2.Assessing the Strategic Options available to Morrisons Generic strategies: businesses have three strategic options: 1.

and in which markets. provide an important guide to the direction of growth • Ansoff drew up a growth vector matrix that described how a combination of business activities in existing and new markets. together with existing and new products. can lead to growth • The four strategies arising from the matrix are: – Market penetration – increasing market share – Market development – where a business seeks new markets (either new geographies or new customer segments) for its products and abilities – Product development – the launch of new products to existing markets – Diversification – when a business decides to offer new products in new markets tutor2u .The Ansoff Matrix can be used to help make decisions about products and markets • Decisions about what products to sell.

Ansoff Matrix: Products and Markets Existing Products Existing Markets New Products Market Penetration Product Development New Markets Market Development Diversification tutor2u .

g. internal resources of the business Acquisitions Growth by buying other businesses or assets Advantages  Makes best use of existing resources  Consistent with the culture and management style of the business  May lead to economies of scale  Easier to control = less risk Advantages  Can overcome barriers to entry  Helps spread the risk (not all eggs in the same basket)  Provides quick access to key business resources (e.g. brands)  Easier to control = less risk Disadvantages  Often slow particularly if existing markets are low growth  Doesn’t create barriers to entry  Spare resources (e. cash) may be wasted  Can create a cautious approach Disadvantages  Cost – price usually too high  Different cultures – may clash  Customers may be upset  High failure rate (70% of acquisitions fail to achieve their objective) e.g. build extensions and more stores e.There are two choices to be made about how a business should invest in a growth strategy Organic Growth Growth by using the existing. buy a supermarket competitor tutor2u .g.

Ansoff’s Matrix can be applied to Morrisons. giving the business a number of different strategic options Existing Products Existing Markets Market Penetration Expand organically in the UK by building more stores Expand in the UK by acquisition of a competitor New Products Product Development Develop an online shopping capability New Markets Market Development Expand overseas Target new customers through the development of convenience stores Diversification Develop a broader non-food business tutor2u .

does not necessarily offer economies of scale Spread risk by operating in markets that are not directly competitive or complimentary Advantages: May obtain synergies (e.g. decisions need to be taken about whether or not the growth markets are related Option Horizontal Integration (Related Markets) Vertical Integration (Related Markets) Business becomes its own supplier (backward integration) or distributor (forward integration) Advantages: Secure supply. using same distribution channel) Disadvantages: Limited experience in separate markets increases risk of things going wrong. take more profit from the value chain.Which ever option is selected. cultural differences tutor2u Description Grow activities that are competitive with and complementary to existing activities Diversification (Unrelated Markets) . create barriers to entry Disadvantages: More exposed to the same market.

Strategic Option: Morrisons could expand organically in the UK by building more stores tutor2u .

5 Million square feet by 2011 – New building projects on the edge of towns and in cities where they have no current presence to include 0.A Market Penetration Strategy: Organic Growth? • This option is about generating more food and grocery sales as well as winning market share from competitors.5 Million square feet by 2011 tutor2u . Morrisons has a stated aim of increasing its shop floor space by the end of 2011 by 2 Million square feet of additional space Morrisons would focus on: • Building more store capacity by – Adding extensions to existing stores to make them bigger by a combined 1.

Strategic Option: Morrisons could expand in the UK by the acquisition of a competitor tutor2u .

A Market Penetration Strategy: Growth by Acquisition? • This option is about generating immediate and significant growth in market share by acquiring an existing UK supermarket such as Lidl. Aldi or Iceland. Morrisons would need to • Conduct appropriate market research • Raise the necessary funding in conjunction with shareholders and/or the banks • Ensure that the acquisition did not contravene Competition Commission regulations • Prepare a plan for corporate integration and the generation of synergies tutor2u .

Strategic Option: Morrisons could develop an online shopping capability tutor2u .

A Product Development Strategy: An online shopping capability? • This option is about building an online food and grocery business along the lines of Ocado or Tesco.com. Morrisons would need to • Build and launch a robust web application • Ensure that their stock management and logistics systems could integrate into the new demand model • Build or contract a distribution network of vehicles and staff to deliver food and groceries to homes • Adapt their marketing campaign tutor2u .

Strategic Option: Morrisons could expand overseas tutor2u .

America or Asia similar to what Tesco has done. Morrisons would need to: • Conduct market research to understand the market for supermarkets in selected new territories (being alive to the fact that Tesco has struggled with its ‘Fresh and Easy’ brand in America and found it hard to enter the Indian market) • Develop relationships or joint ventures with local producers and distributors in selected countries • Ensure that the supply chain can feed demand for Morrisons products abroad tutor2u .A Market Development Strategy: Superstores abroad? • This option involves replicating the Morrisons superstore model in Europe.

Strategic Option: Morrisons could target new customers through the development of convenience stores tutor2u .

A Market Development Strategy: Smaller. convenience stores? • This option involves developing smaller stores in town centres and motorway service areas similar to One Stop or Tesco Express. Morrisons would need to • Identify key locations to target convenience stores • Get planning permission for these stores and construct them • Adapt its Market Street model because it would probably not be economic or practical to have butchers and bakers etc in convenience stores • Modify its marketing campaign tutor2u .

Strategic Option: Morrisons could develop a broader non food business tutor2u .

A Diversification Strategy: Clothes. TVs. telecommunications and bank accounts Morrisons would need to • Expand its current non food range considerably • Build extensions to its stores to create additional space for the non food product range • Modify its marketing campaign • Train the workforce in the sale of these new products tutor2u . Electricals and Financial Services? • This option involves diversifying to target customers who want to buy a range of products such as clothing.

what are the potential effects if things go badly wrong?) tutor2u .Evaluating the Options – Decision Methods • Cost / benefit analysis – Quantifying costs and benefits in monetary terms – But it is hard to quantify intangibles such as the impact of strategy on culture • Ranking and scoring – Rank strategic options by scoring them against criteria (e. return on investment) • Investment appraisal – – – – How to address the problem of risk All strategies involve uncertainty Return on investment: several methods Need to include sensitivity analysis (e.g.g.

does the chosen strategy: – – – – Build on strengths and/or solve weaknesses? Exploit opportunities and/or respond to potential threats? Satisfy the goals and objectives of the business? Fit the culture of the business? • Acceptability: – Depends on the views of the key stakeholders – What level of risk does the business want to take? • Feasibility: – What resources are available to support the strategy? (e. finance.Evaluating Morrisons’ Strategic Options: The key tests The options can be assessed against three key criteria: • Suitability: . management resources) tutor2u . experience.g.

Strategic Option: Organic Growth Suitability  Fits well with existing strategy  Morrisons has experience of this approach  Good fit with the corporate growth objectives Acceptability  Enables Morrison to protect its USP  Low risk because this is core business – more of the same  Could be considered as a rather conservative approach if it means that Morrisons miss out on the opportunity to grow through NPD or Market Development or Diversification Feasibility  Probably the easiest of the six options  Financial capital is available for investment in expansion tutor2u .

Strategic Option: Growth by Acquisition Suitability  Fits with previous experience of growth by acquisition  Logical to expand through horizontal integration in this market Acceptability  Shareholders might be unsupportive given their difficult experience with the Safeway acquisition in 2005. although the Somerfield store integration has gone better  Medium to high risk because acquisitions and the expected synergies are hard to deliver Feasibility  Would require an integration strategy  Would require significant capital to purchase the competitor  Could have problems with the Competition Commission tutor2u .

Strategic Option: An online shopping capability Suitability  Supports the corporate growth objective  Does not really build upon Morrisons’ current strengths which are based on in-store food and grocery sales  Would represent a cultural shift Acceptability  Medium risk since they have no experience of this approach. although many other supermarkets have made it work successfully  None of the Directors has expressed any real interest in this business so far Feasibility  Reasonably easy to design and launch the technology  More work required to set up the distribution and delivery network and to integrate it within their core business tutor2u .

Strategic Option: Superstores abroad
Suitability
 There may be gaps in the market in new territories, especially for “British” products  The strategy is a good fit with their growth objective

Acceptability
 Morrisons has no experience of working abroad, it is a very British company and is still trying to gain a nationwide coverage in its home market, the UK  High/Medium risk given the difficulties that Tesco have experienced

Feasibility
 Financial investment is probably available for a phased expansion into new territories  Requires significant up front work building joint ventures and local partnerships abroad
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Strategic Option: Smaller, convenience stores
Suitability
 This market has become crowded and Morrisons would be a late arrival  Morrisons has no experience with smaller convenience stores  The business model and ‘fresh’ mantra might have to be changed

Acceptability
 Medium risk, but could be a slow return on investment  Would require a cultural shift from their current model

Feasibility
 Investment capital is available for expansion  Would require the acquisition of some convenience store retail skills and experience

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Strategic Option: Clothes, Electricals and Financial Services
Suitability
 Extending their retail skills into other areas has worked for other supermarkets  Morrisons has already put a toe in the water in the non food sector  It does not fit with their vision statement

Acceptability
 Could be acceptable for directors who have already sanctioned limited activity in this arena  Low/Medium risk, unknown returns

Feasibility
 Need for staff training, but they could use the Training Academy for this  Need for more store space – this is possible  Need to build relationships with product suppliers
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Here are some things that you could do before the examinations in January and June 2011 Primary Research • If your school is within travelling distance of Morrisons’ Head Office in Bradford or one of their regional distribution centres. Asda. you could ask if they will allow you to visit • Go shopping at a Morrisons supermarket – – – Have a look at the layout of the store Review the various products sold Talk to Morrisons employees about what it is really like to work there Why they prefer Morrisons to Tesco. so you can expect updated accounts. customer feedback sites etc. twitter. J Sainsbury. internet discussion forums.) Rises and falls in the Morrison share price on the London Stock Exchange – – – tutor2u . sales figures and developments at Morrisons between now and June 2011) articles and views about developments in supermarket retailing across the world Web 2. Waitrose etc.0 information (blogs. What they don’t like about Morrisons • Interview customers who shop at Morrisons and ask them – – Secondary Research • Keep up to date with market developments on a weekly basis by using your search engine to trawl the web for – information and announcements about Morrisons (the case study is written a long time in advance of your examination.

Concluding thought… “The odds of going to the store for a loaf of bread and coming out with only a loaf of bread are three billion to one” Erma Bombeck tutor2u .