Case 4

Super Selectos: winning the war against

multinational retail chains

INTRODUCTION

This case examines how Super Selectos, a local food retail chain from El Salvador,
became successful in competing against Walmart, the largest food retailer in the
world. After an overview of Central America region and the retail industry, the
strategies of global retailers are described. Further, the case describes the food
retailers in Central America and the Calleja Group. The case then delves into the
competitive environment by reviewing the history of Walmart and how it entered
Central America. The strategies used by Super Selectos are examined throughout the
case in addition to forming SUCAP, Supermercados de Central America y Panamá, a
strategic alliance established by owners/founders/CEOs of the leading domestic
supermarket chains in Central America.

This case is ideal for demonstrating the importance of the external environment,
competitive analysis, and SWOT analysis. The following points are to guide a review
and discussion of these important concepts.

 Describe the general environment that Super Selectos faces. What are the
segments in the general environment that relate to Super Selectos’ situation?
 Conduct a competitor analysis and assess the levels of market commonality
and resource similarity that Super Selectos has with Walmart. How will they
influence competitive behaviour and the intensity of rivalry?
 Considering Super Selectos’ external and internal environmental conditions,
does a SWOT analysis reveal any insights to enhance the company’s efforts to
compete or improve performance?
 Examine Super Selectos’ strategies. How can the company remain as a
market leader in El Salvador? Based on your analysis, make
recommendations in order for Super Selectos to compete with Walmart.

EXTERNAL ANALYSIS

Describe the general environment that Super Selectos faces.

Segments in the general environment that impact Super Selectos are primarily
demographic, economic, political/legal, and global segments. Central America has a
growing economy as a region, and El Salvador is the fourth largest economy in the
Central America region.
Hanson 6e – Case Analysis

Super Selectos is the largest local food retailer in El Salvador. El Salvador has several
important and unique segments in the general environment. The primary segments
in the general environment that Super Selectos faces are:

General Environment

Demographic Segment 40.2% poverty rate in many municipalities (100

municipalities with extreme poverty rates of 40.2% and
household incomes averaging US$201; 146 municipalities
with extreme poverty rates of 19.4% and household
incomes averaging US$308; 16 municipalities with
extreme poverty rates of 7.6% and household income
averaging US$534

Economic Segment One of the largest growing economies in the region

Fourth largest economy in the Central America region (In

2010, its GDP reached US$21.2 billion, approximately
US$3400 per person)

One of the main sources of income was family

remittances from the US according to the Central Bank

Inflation rate one of the lowest rates in the region (2.1%

compared to 6.5% in the Central America region in 2010)

Large increase in the price of food and transportation

(7.9% increase in the price of food and 3.4% increase in
the cost of transportation)

Political/legal Segment Improvements in the country’s economic and social areas

were backed by an anti-crisis plan:

 Creation of 100,000 jobs by 2011

 Increase public employee lowest salaries and

pensions 45% and 44% and the rest 6% and 8%

 Enforced warranties for purchased products

 The right to be reimbursed in cash when a product

was defective

Global Segment Increase in the size of the commercial establishments

(allowed businesses to offer a greater variety of products
in larger volumes)

Adoption of information technology in logistics and

operations management (allow retailers to lower their
costs and become more efficient)

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 Case 4: Super Selectos: winning the war against multinational retail chains

COMPETITORS

Conduct a competitor analysis (and assess the levels of market commonality and
resource similarity that Super Selectos has with Walmart. How will they influence
competitive behavior and the intensity of rivalry?)

A competitor analysis is the first step Super Selectos can take in order to be able to
predict the extent and nature of its rivalry with each competitor. There are two
important dimensions in a competitor analysis: market commonality and resource
similarity. The number of markets in which firms compete against each other is
called market commonality while the similarity in their resources is called resource
similarity.

Because Super Selectos and Walmart are both supermarkets in the food retail
industry in El Salvador, they have a high degree of market commonality in the
country. Firms competing in several of the same markets have the potential to
respond to a competitor’s actions not only within the market in which a given set of
actions are taken, but also in other markets where they compete with the rival.

Resource similarity is the extent to which the firm’s tangible and intangible resources
are comparable to a competitor’s in terms of both type and amount. In terms of
financial resource similarity, Super Selectos is the largest food retailer in El Salvador
with 84 retail stores, 51% of the market and US$600 million in annual income. The
table below shows the annual sales of Super Selectos:

Annual Sales of Super Selectos

Year Net sales (million US$) Growth from Last Year

2006 403 NA
2007 440 9.18%
2008 446 1.36%
2009 514 15.25%
2010 551 7.20%

On the other hand, Walmart is the largest retailer in the world. By 2010, Walmart
had 129 distribution centres each serving more than 75 stores. Walmart’s IT system
allows the company to have real time information on sales, stock, deliveries by store,
to manage the size and mix of the products by store based on specific customer
characteristics and more.

In 2006, Walmart became the owner of 51% of CARHCO and changed the name from
CARHCO to Walmart Central America. In January 2010, Walmart Mexico announced
its merger with Walmart Central America paying US$2.7 billion and acquiring a total
of 519 stores. The following table shows the net sales of Walmart Mexico and
Central America:

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Hanson 6e – Case Analysis

Net sales of Walmart Mexico and Central America (millions of US$)

Year Mexico Central America Consolidated

2009 21380.7 3414.8 21380.7
2010 23458.3 3648.9 26548.5

As both tables above indicate, Walmart has a much higher degree of financial
resource than Super Selectos does. Thus, although the degree of market
commonality is high, the degree of financial resource similarity is low. In terms of
other resources, Walmart and Super Selectos also have a low degree of resource
similarity. Super Selectos has the following resources:

 Strong leadership
 Existing brand image and recognition
 Management experience
 Improved IT technology

On the other hand, Walmart has the following resources:

 Strong global brand recognition

 Customers’ perception of low price
 Strong central leadership with aggressive growth strategy
 High bargaining power as a buyer
 Real time information on inventory and supply
 Experience in international strategy

Core competencies

 Excellent Salvadorian leadership

 Excellent understanding of the Salvadorian situation
 Good set of shops in rural areas that enable reach in El Salvadore
 Flexibility in strategies
 Ability to source and sell Salvadorian products
 Use of a Salvadorian brand to sell goods

These CCs are hard for Walmart to match. A range of other retailing capabilities are
held by both organisations.

Because of the high degree of market commonality and low degree of resource
similarity, the competition is more intensified for Super Selectos. Super Selectos has
to constantly think of new ways to compete with Walmart, whom has more access
to resources globally. However, Super Selectos is also in a strong position to
compete with Walmart in El Salvador. Super Selectos is a local food retailer with a
name that most people can recognise in the country. This is a great intangible asset
that Walmart does not have. In addition, with Super Selectos’ strong leadership and
differentiation strategy, it should be able to defend its market position even after
Walmart entered El Salvador.

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 Case 4: Super Selectos: winning the war against multinational retail chains

SWOT ANALYSIS

Considering Super Selectos’ external and internal environmental conditions, does a

SWOT analysis reveal any insights to enhance the company’s efforts to compete or
improve performance?

Delving into the Super Selectos’ internal and external environments reveals the
strengths, weaknesses, opportunities, and threats prevailing in the current situation.

Strengths (check core competencies)

Strong leadership Leading supermarket chain

Existing brand image and recognition Quick response to strong competitors

Management experience Hi-Low pricing strategy

Many stores in remote areas away from Differentiated markets served: Super
large cities Selectos and Selectos Market

Flexible and locally focused Many promotions

Quick day-to-day sales strategy Considered number one supermarket in

the country

Strong revenue growth Sell many Salvadorian products

Weaknesses

Does not have high bargaining power as No global exposure

Walmart

Does not have the same level of resource

as Walmart

Opportunities ( using core competencies)

Targets customers that live away from Can potentially expand to other
large cities countries in the Central America region

Provides 100% Salvadorian products to

attract local customers

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Hanson 6e – Case Analysis

Threats

Other large global food retailer, such as Fierce competition on the rise
Walmart

Competitors able to undercut price and Rival companies with means to expand
create value aggressively

Visibility of the market

Based on the SWOT analysis, Super Selectos is still in a very good position in the
market. Although there are some weaknesses and threats, the strengths and
opportunities seem to outweigh them. However, the weaknesses and threats will
need to be addressed in order for Super Selectos to remain successful in the market.

STRATEGIES

Examine Super Selectos’ strategies. How can the company remain as a market
leader in El Salvador? Based on your analysis, make recommendations in order for
Super Selectos to compete with Walmart.

Although faced with intense competition from the largest retailer in the world,
Walmart, Super Selectos is in an excellent position financially and strategically. The
preceding analysis adds clarity to the company’s current situation and facilitates the
development of recommendations for handling Super Selectos’ most pressing
strategic challenges.

Alliance with Other Food Retailers in Central America

Super Selectos already joined SUCAP, which was formed by owners/founders/CEOs

of the leading domestic supermarket chains in Central America. In 2008 SUCAP
owned 278 supermarkets in six countries with US$2.2 billion in annual sales and
close to 24,000 employees. The alliance started as a broad agreement to cooperate
to face competition from foreign retailers. It gradually acquired a structured
organisational form, and a board of directors led by President Francisco Calleja of
Selectos. There are three steps that SUCAP takes:

1. Sharing information and ideas

2. Sharing best practices
3. Using a joint purchase strategy

Members can use SUCAP to learn from one another and the most important thing is,
to gain higher bargaining power with suppliers when the members join purchases
together. This is a great strategy for smaller food retailers when they need to
compete with large global retailers such as Walmart. Another recommendation can
be made regarding to the alliance, SUCAP, is that the members can join IT efforts and
share the development and infrastructure/equipment cost. Because it costs a lot of

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 Case 4: Super Selectos: winning the war against multinational retail chains

money for a company to purchase an IT solution (such as an Integrated Business

Management System (IBMS) and a Point of Sale (POS) Information System) to
manage inventory, supplies, and logistics, the cost can possibly be reduced when
many retailers join together to purchase the system and the equipment. Thus,
SUCAP’s members can use the consolidated buying power for an information
technology solution that is usually only available to large global retailers such as
Walmart.

Super Selectos’ Leadership and Strategy

Super Selectos has the following important strengths:

 Strong leadership
 Existing brand image and recognition
 Management experience
 Differentiation strategy
 Flexible and locally focused

It is critical that the leadership continuously to be responsive to customer’s demand

and changing tastes. Differentiation strategy is the key. Due to Walmart’s high
bargaining power to the suppliers, competing against Walmart based on price will be
very difficult. Super Selectos has to be able to offer customers food and products at
the best price, while differentiating itself from Walmart. For example, campaigns
such as 100% Salvadorian produce will attract customers that prefer fresh local
produce.

Because Walmart is more likely to have a global strategy and centralised decision-
making system, Super Selectos should be able to respond to local consumers’
preference at a much faster speed. In addition, Super Selectos is a local store, it
should be more aware of the local culture and events. Super Selectos can have
different promotions that relate to them. Super Selectos should also engage in local
charities to promote the retailer’s image.

Based on the analysis, Super Selectos is in a good position to compete against

Walmart. Although it will not be easy due to Walmart’s size, Super Selectos have a
great opportunity to defend its market leader position.

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May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.