tutor2u

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

tutor2u

Opening thought…

“A person buying ordinary products in a supermarket is in touch with his deepest emotions” JK Galbraith
tutor2u

Strategy Toolkit Contents • • • • Introduction Thinking strategically Strategic analysis of Morrisons’ business Strategic options for Morrisons tutor2u .

Hopefully you will find them helpful. However. in corporate strategy analysis. 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. Yorkshire It is important to remember that.Introduction • This presentation reviews the market for supermarkets and takes you through the key corporate strategy issues facing Morrisons. recognising that strategy issues are not just about marketing or finance or production – but about inter-related issues tutor2u • • • • • .e. a public limited company listed on the London Stock Exchange with its headquarters in Bradford. 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.

you need to answer the questions actually set. Examiners have a habit of asking tricky questions.Morrisons and this Toolkit What We Have Done • • • • • • • Worked carefully through the case study – like you should too Analysed the data. VLE and class notes should cover those fine. VLE and revision notes on corporate strategy (refer back to these as necessary) Provided lots of notes on corporate strategy concepts – your textbook. In any event. class. 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. 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. You need to get thinking about supermarkets! tutor2u • • • .

Try to identify what you think are the key strategic issues. form your initial views on the business – positive and negative. Read our advice on “Thinking Strategically” Go back to the case study and re-read it. study the words.How to Work Through This Presentation Read the Morrisons case study carefully. look at all seven pieces of Evidence (A to G). 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 .

Thinking Strategically 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.Thinking strategically means imagining YOU are sitting at the Morrisons boardroom table in Bradford with Dalton Philips. hopefully fresh. who replaced Marc Bolland in January 2010 Your business lunch will probably come from Market Street. possibly organic. Food for thought… tutor2u .

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 .

What information does he need? 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.

these are the things that really stop a business from succeeding. Your job is to tell it as you see it.Be careful with your SWOT Analysis – don’t believe management hype! Strengths …these are ONLY factors where a business has a real competitive advantage. 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. Some don’t have any. tutor2u . Most businesses have some fundamental weaknesses – but management often ignore them (and rarely admit them).

Good management is about sorting things out Try to identify the really important issues.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. These are the strategic challenges that the company must address tutor2u . problems or challenges facing Morrisons. Don’t get too bogged down by what look like numerous issues.

Strategic Analysis of Morrisons tutor2u .

Market Overview: Supermarkets Market Size • The UK grocery market is worth £97B • The market is growing fast at 20-25% pa by volume • 12. • 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. The three key buying criteria in the market are – – – Price (value for money) Convenience (location) Freshness (quality) • During the current. fewer consumers are eating out which has prompted a rise in sales of ‘cook at home’ ranges tutor2u . tough economic climate.8% of consumer income is spent on groceries. J Sainsbury and Morrison have a 79% market share between them. 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. Asda. giving the market the characteristics of an oligopoly.

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

www. In 2009 it purchased 51 stores from the failed Woolworths chain. Besides food sales it has a strong range of non food items. It is the world’s largest community owned business with 4.uk • The Co-operative Group – The Co-op has a total market share of around 8%. www.000 employees and. It has about 700 locations and sells primarily frozen products. It has a market share of about 1.marksandspencer.co. It has a market share of around 4%. It differentiates itself through high quality food and customer service. It has a market share of 2%.owned by the German company Schwarz it has about 500 stores in the UK. www. in 2009.8%. Waitrose is an up-market supermarket chain that currently has 228 branches in the UK.Some Smaller and Niche Competitors Waitrose – owned by the John Lewis Partnership. especially clothing. to make it the fifth largest supermarket in the UK .com tutor2u • • . it positions itself towards the up-market end of the grocery spectrum. www. it acquired Somerfield. It follows the European-based. heavily price discounted format. It has 422 stores in the UK and a market share of 3%.waitrose. Baugur.co-operative. www.coop • Lidl . Like Waitrose. specialising in convenience stores and small supermarkets.aldi.co.5M members and it is the UK’s largest community retailer. www.com Marks & Spencer – M&S has over 700 stores in the UK. It has 123.lidl.iceland.com • Iceland – owned by the Icelandic retail conglomerate.uk • Aldi – another German owned UK price discounter owned by the Albrecht family (and named after the acronym ALbrecht DIscount). It has a grocery market share of less than 2%.

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

fuel. electricals. financial services etc (e. Asda.g. Tesco Express.g.g. M&S) – The convenience store sector (e. Tesco. 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 .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. Sainsbury.g. Sainsburys) • New Product Development – Online food sales and home delivery (e.g. Co-op/Somerfield) • Market Development to access new customers in – Overseas markets (e. Ocado) • Diversification into non food sales – Clothing.

A Brief History of the Development of Morrisons • • • • • • • In 1899. The acquisition did not go smoothly. measuring 5. 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. Yorkshire In 1958. 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. most of which were located in the North of England near the company’s Yorkshire base. started Morrisons from a market stall in Bradford. 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 . his son and successor. By 1999. 100 years after its inception. The Safeway to Morrisons store conversion process was the largest of its kind in British retail history. In 2008.000 sq ft. an egg and butter merchant. His 55-year career had seen him transform his father’s small market stall into a £13 billion nationwide supermarket chain. Ken Morrison . Sir Ken Morrison announced his retirement from the business after more than half a century at the helm. the integration took time to take effect and profits fell. opened the first Morrisons self-service store in Bradford city centre In 1961 the first Morrisons supermarket was openend. In 1967 it became a public limited company listed on the London Stock Exchange By the end of the 1980s. William Morrison.

Morrisons has a unique culture.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. Dalton Philips. traditional Northern retailer to a more professional. national organisation with broad appeal. www. and for the first time for 110 years. It has: – – – – 425 stores 131.Morrisons Today • Wm Morrison Supermarkets PLC is a UK based company engaged in the business of food and grocery retailing.uk tutor2u • • • . pie selling. 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.morrisons. no member of the Morrison family is in an executive or board room role. now.co. Today. It is the UK’s fourth largest supermarket and is in the top 50 FTSE index of UK companies by market capitalisation. Morrisons has transformed from a budget.

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. Fresh – owning its vertically integrated supply chain and selling food that is freshly prepared in store. – – 3.5M sq feet of space). – – • The strategy could be summarised as “fresh food at low prices”. It is the most vertically integrated food retailer in Britain. meat and cheese processing plants and bakeries. owning abattoirs. 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. All of this helps the business to achieve its number one vision . sausages (own pie and sausage factory) Food is fresher because it comes in faster with no middlemen and no warehouses. It aims to: Move from ‘national’ to ‘nationwide’ by opening more stores across the UK Add 60 stores over the next three years (1. – – – 2. Value – keeping costs low and offering great value across the product range. bacon.Morrisons’ Current Corporate Strategy • • Morrisons’ Vision is “To be food specialist for everyone” Its three brand values are 1. 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 . fruit and vegetable pack houses.to be the food specialist for everyone.

lamb. tutor2u .g.800 trailers 425 Stores across the UK Including in store bakeries. pork. 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. fishmongers. Heinz) Morrisons is different from other supermarkets because it owns and control its supply chain. This means that Morrisons are closer to source by ‘cutting out the middleman’. butchers etc Customers Brands sourced From other manufacturers (e. 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.Morrisons Business Model: A vertically integrated approach which is different from other supermarkets Sourcing & Selection 100% British beef.

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. achieving cost efficiency and keeping prices low. • • • • • tutor2u . 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. 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. producing only what the customer wants reducing waste from over production.

fresh meat processor • Rathbone Kear Limited .produce wholesaler • Wm Morrison Produce 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 .baker (acquired in 2005) • Farock Insurance Company Limited .grocery retailer Safeway Stores Limited -grocery retailer • In addition.captive insurer • Safeway Overseas Limited . The first livestock are Shorthorn and Angus cattle.manufacturer and distributor • Neerock Limited . • The farm rears traditional cattle and sheep breeds. 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".produce packer • Farmers Boy Limited. . carrying out research and developing best practice for the industry and making a contribution to helping the long-term sustainability of British farming. tutor2u . Morrisons hopes to open a second research farm in south-east England later this year.holding company • Safeway Overseas 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 .

Morrisons is different from other supermarkets because it: • • Owns its supply chain. because our great food is also always great value” (Morrisons Website) tutor2u . fishmongers and bakers than our competitors.MARKETING: Morrisons has a very clear Unique Selling Point Morrisons does not just compete on price. Makes and packs its own fresh produce which is washed. through the amount of food preparation undertaken in our stores and through the employment of more specialist butchers. its own manufacturing sites and ‘Market Street’. burgers and sausage rolls are made in its meat processing plant. through our unique manufacturing and packing facilities. graded and packed in its own packing facilities – – three bakeries produce six million loaves. We stress that our offer is for everyone. where it is cut in store by trained butchers • Produces 1.700 fresh lines of food in stores everyday “ We emphasise our deep understanding of food: through being closer to source than other retailers. rolls and muffins each week fresh meat products like pies. • 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.

following market research indicating that 74% of customers wanted opportunities to buy more regional produce in store. Morrisons introduced the new ‘From My Farm’ range. 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. tools and recipes. Products are sold under both Morrisons own brand label as well as renowned. In 2008. 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. 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. CDs and console games. bakery items. gluten or dairy-free diets). home-ware product lines to complement its food range Sales growth of the Value range have been up 50% in the last year. alcoholic and non-alcoholic beverages. etc) and a wide range of DVDS. Kids Smart. garden furniture. fish and meat. Morrisons Organic. Free From (foods for wheat. It is currently launching a further 500 non-food. while sales of the Premium range “The Best” are up by 5%. Food Fusions. household brands from around the world. dairy based products. and its Premium food range branded “The Best”. Food ranges include the basic Morrisons Value. with 20% coming from the sale of fuel/petrol A range products is available including green grocery.MARKETING: There is a range of Products and Prices. Unlike its main rivals. 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 . Eat Smart. socks. pharmaceuticals.

a Fresh to Go counter (for salads. a pie shop. 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. Petrol stations are also a common feature of most stores. but are there enough of them? • Morrisons has built its reputation around a no-frills store format called Market Street . All stores feature a butcher's counter. including an exclusive credit card and savings account. a cake shop and a cafeteria. • • • But • Morrisons’ market is limited because: – 35% of Britons (7 million households) live more than 15 minutes away from a Morrisons store (i. deli and fish counters.MARKETING: Place – “Market Street” is a successful store format. bakery. pizzas and pasta). HSBC Bank outlets can also be found in a number of stores. 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 . sandwiches. which offer a range of financial services. with more conventional aisles in the centre.e.

Pay less" to promote its freshness message. created by DLKW and launched this year. 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. Alan Hansen and Nick Hancock. "Fresh choice for you".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. asking farmers and buyers questions about meat. The strategy also marks a change to the brand’s strapline. who explains how Morrisons is different to its main rivals. Richard Hammond. Asda and Sainsbury’s. The children are then seen in-store with a butcher. while appealing to consumers' wallets. The ad shows school children on a trip to a farm. The new campaign. • • • • 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 . It will now use "Eat fresh. Tesco. swaps famous faces for inquisitive children visiting farms and butchers and asking questions about the origins of Morrisons’ fresh food.

2m of gardening equipment The scheme competes with Tesco’s Schools and Clubs scheme .000 schools have registered for the programme and Morrisons has given away over £3. 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. having generated a claimed ROI of £21. food production and schools • Morrisons' promotional strategy also includes its Let's Grow voucher scheme. biodegradable pots.MARKETING: The ‘Let’s Grow’ voucher scheme is targeted at freshness. spades. tutor2u • • • • • . soil testing kits. Vouchers can then be redeemed for free gardening equipment for schools including seeds. smocks. sun hats and even a state of the art wormery (which enables Tiger worms to munch their way through garden and kitchen waste. hoes.57 per £1 spent. encourages customers to collect vouchers in-store for every £10 they spend.and Sainsbury’s Active Kids initiative In 2009 it won the IPA Effectiveness Grand Prix. Let’s Grow ties into the National Curriculum and also supports the Government’s ‘Growing Schools’ initiative. The initiative. which was launched in 2008. hosepipes.

bread rolls. 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.OPERATIONS: Morrison is a producer as well as a retailer. 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. Morrisons owns a farm in Scotland. It is intended that the farm will become become one of the leading centres of excellence for applied farming research.g. • It is a ground-breaking joint venture to help improve the efficiency and sustainability of British farming. preparing packaged salads in-store Batch production – e.886 tonnes. tuna steaks • • In 2009 Morrisons reduced the volume of waste sent to landfill by 2. with support of the • National Farmers Union of Scotland.g. making sandwiches in-store. Morrisons work in a joint venture partnership with the Scottish Agricultural College. • 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.

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

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

000 people are employed in the UK which makes it a significant employer. Values • Values define what Morrisons expects from employees and what customers can expect as well. These include a can do approach. bringing the best out of people.HUMAN RESOURCES: Morrisons integrates its core values within its HR strategy and culture Strategy • 131. Leadership • Leadership development initiatives. great selling and service and fresh thinking. To attract. 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. • 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. motivate and develop skilled people to ensure that Morrisons becomes the food specialist for everyone. great shopkeeping. one team.

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. 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 .

– – A new dedicated recruitment website. National advertising has raised the profile of Morrisons as an employer.300 colleagues formerly employed by the Co-operative Group or Somerfield have joined through acquisition growth. launched in 2008. all of these colleagues have undergone training in core values of customer service and the fresh food offer. fishmongery and bakery The ‘I Want a Fresh Start’ campaign. • Every new employee experiences the Vision and Values programme as part of their induction.HUMAN RESOURCES: Morrisons’s growth has meant they have been able to create and recruit new jobs despite the recent. – As part of the conversion of these stores to the Morrisons format. redefined Morrisons’ approach to attracting and recruiting fresh talent into the business. many in butchery.000 to 131. allows candidates to apply online for careers at Morrisons. www.iwantafreshstart. tough economic times in the UK • • • Workforce numbers have risen from 124.com.700 new jobs were created through organic growth. evidenced by the high interest and number of applications for management positions in particular and the appointment of 50 key retail managers. • 2.000 in the last year or so 4. tutor2u .

greengrocers and fishmongers.HUMAN RESOURCES: Morrisons spends significant time and money on its quality training and development programme • In 2009. This initiative reflects current trends in retail training. In July 2010 more than 24. reducing wastage and giving great selling and service. • The Fresh is Best programme focuses on engaging and training managers to deliver readily available. whilst maintaining standards. with 31% having level 4 or higher standard qualifications in 2010. well presented. thereby becoming officially qualified as bakers. The number of retail workers across the sector with no recognised qualification has dropped from 17% in 2002 to 11% in 2010. Morrisons launched The Fresh Food Training Academy to strengthen its position as the UK’s leading proponent of retail craft food skills. • • tutor2u .000 Morrisons’ staff graduated with Edexcel’s Level 2 (formerly NVQ) Diplomas in Retail Skills from the supermarket’s Training Academy. quality products. Managers are increasing their skills too. compared with only 20% in 2002. These skills help – – people build a career and Morrisons further increase the quality. butchers. value and service provided to customers. freshly prepared.

tutor2u .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. Thomas Cook. 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. 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. RAC. Theatre trips. Christmas parties.g.

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

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

0%) tutor2u .9% 6.615 913 37 -281 2 671 -16 655 -195 460 612 -58 554 31% 33% 30% 7% 236% -17% 2008 12.6%).062 65 -224 4 907 -49 858 -260 598 2009 14. they are slightly lower than Tesco (6.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 15.969 12.6% 4.3% 6.7%Net Profit Margin -20% 5% % Change 2009-10 2008-9 6% 5% 16% 12% 12% 12% 6.410 14.9% 4.528 13.348 1.151 818 30 -268 32 612 35% 10% 5.3%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.

plant and equipment portfolio at about £7.g.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.18M last year tutor2u .60 and £3. Acquisition of Safeway in 2004 – e.5 Billion • The share price has fluctuated between £2.g.00 in last 12 months • As a public limited company. it can raise significant sums of money through the sale of shares and/or through borrowing in order to expand – e. 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.

8 4.53 0.24 20.4p). 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.6 2008 0.0 22.3 • • But • Although the PE ratio (an indication of future growth) is higher than J Sainsbury.FINANCE: Morrisons key ratios show real financial strength.8 12 15.8 8.2 13 14.25 24.2 0. it is lower than Tesco (27.49 0. it is lower than Tesco • Although EPS is higher than Sainsbury (16. 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.3 20.3p) • 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.28 27. 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 0.8 12 15.4 5.1 17.51 0. especially in 2010 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.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 .

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

tutor2u

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
tutor2u

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

tutor2u

Social (and Environmantal) Opportunities • Consumers have increasingly exotic tastes and desire variety. Threats • There are strong doubts about the safety and ethics of genetically modified (GM) food tutor2u . 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. 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. 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. especially organic foods.

Kraft and Walkers tutor2u . imported delicacies like stuffed vine leaves and Italian biscuits Targeting bulk buyers – ‘steak lover pack’ £57. • 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. This could substantially change the ‘physical’ shopping model of the future.000 grocery items including branded products from Pampers. 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.Technological Opportunities • The application of increasingly sophisticated IT systems for logistics management can help supermarkets to optimize their supply chains. organic jam.15 for 16 steaks 22. Dolmio. Uncle Ben’s Ariel.

ethical products • Food miles and carbon offset Threats • Competition Commission • Online retailing tutor2u .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. organic.

this threat diminishes Grow your own fruit and veg? Development of drink/tablet replacements for food? • • • • • • • Supplier Power (Low) Numerous. it is hard to enter. 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 . 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. but many products are the same Steady industry growth Medium/High exit barriers • • • • Customer Power (High) Easy to switch. 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. always looking for value • • Threat of New Entrants (Medium/Low) Due to the high economies of scale. strong learning curve effect and large capital requirements. diluted suppliers High threat of vertical integration Limited volume.Strategic Analysis: Michael Porter’s Five Forces Model • Threats of Substitution (Low) As more supermarkets move to the convenience sector.

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

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

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

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 .

such as drainage.Some conclusions and questions arise from the network diagram. 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.g. the marketing launch etc. 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. 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. the construction schedule has no • activity for snagging faults and Morrisons would need to add time for staff training. • 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. 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. For example. 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. medium or low risk investment? Project Planning Considerations By no means all of the activities required to open the store are listed. 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 . would need to be carefully managed since any slippage will result in a delay to the project. • Activities where there is ‘float’ (e.

so it easier to interpret • Encourage forward planning of all activities.Network Diagrams: They are useful to some extent.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 ... deal with delays and cope with the unexpected Remember . The advantages of Network Diagrams and CPA are that they: • Provide decision makers with a picture of a problem.g. 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. but beware. 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. durations of activities. 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.

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

Morrisons is firmly committed to achieving CSR. The CSR programme is structured around three principal areas: Environment . Less Waste’ programme helps educate customers and the general public in better food management It provides easy. it was among the first of only 12 companies to receive the prestigious new Carbon Trust Standard for reducing carbon emissions. The accreditation scheme is the world’s first carbon award requiring an organisation to measure. Carrier bag consumption has been reduced by 71 million bags. Customers were encouraged to use the bags on every shop.taking good care of the planet.taking good care of our shoppers. our colleagues and their communities to give healthy. 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. balanced lifestyles • The ‘Let’s Grow’ programme supports education. This is at odds with a healthy lifestyle and reduced Carbon Footprint Business . It’s philosophy is that by taking good care of what we do today. 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.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 . This was a £16m investment in improved environmental performance • In June 2008. we can make a real difference for tomorrow. 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 . For example. 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. schools and growing fresh food • The ‘Great Taste. manage and reduce its Carbon Footprint and make real reductions year-on-year. carbon. practical tips to improve the storage of food and dispels some myths. • Filling station pumps have been converted to highly efficient ‘vapour recovery’ pumps which emit much reduced levels of fuel vapour into the atmosphere.

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

Morrisons culture is changing • Morrisons has its origins as a budget. 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. a former Walmart executive who was recruited from the Canadian food distributor Loblaw Morrisons culture is therefore becoming more of a Role/Task culture. pie selling traditional Northern retailer – 10 years ago. TV advertisements sold pies. process driven. it has been through a cultural integration programme and opened up access to the market in the South of England For over 100 years. cut price packets of crisps and showed smiling butchers • • • • • • • Having acquired Safeway. 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. 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 .

trade marks. proprietary knowledge. brand identity Capability advantage – skills and competencies. reputation. 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 • • • .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. installed customer base. innovation.

good production processes and efficient resource allocation Winning profitable segments of the market. hard-to-imitate products) Yes Maybe Focus No tutor2u .g. Unit costs may be higher.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. personal service. super fast delivery. market share is less important.

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 .

but they have decided that it is a strategic imperative to continue to grow through increasing shop floor space in the UK 3. their views and interests tutor2u .Assessing the Strategic Options available to Morrisons Generic strategies: businesses have three strategic options: 1. Stability: this could apply to Morrisons. human and financial resources Management structure and skills Culture Key stakeholders and shareholders. Retrenchment: this is not applicable to Morrisons 2. 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.

The Ansoff Matrix can be used to help make decisions about products and markets • Decisions about what products to sell. 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. 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 . together with existing and new products.

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

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. buy a supermarket competitor tutor2u .g.There are two choices to be made about how a business should invest in a growth strategy Organic Growth Growth by using the existing.g.g. build extensions and more stores 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. 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.

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 .

using same distribution channel) Disadvantages: Limited experience in separate markets increases risk of things going wrong.Which ever option is selected. create barriers to entry Disadvantages: More exposed to the same market. take more profit from the value chain. 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. 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. cultural differences tutor2u Description Grow activities that are competitive with and complementary to existing activities Diversification (Unrelated Markets) .g.

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

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 1.5 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.

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

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 .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.

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 .

A Market Development Strategy: Superstores abroad? • This option involves replicating the Morrisons superstore model in Europe. 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 . America or Asia similar to what Tesco has done.

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 .

TVs. Electricals and Financial Services? • This option involves diversifying to target customers who want to buy a range of products such as clothing. 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 .A Diversification Strategy: Clothes.

what are the potential effects if things go badly wrong?) tutor2u . 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.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.g.g.

g. management resources) tutor2u .Evaluating Morrisons’ Strategic Options: The key tests The options can be assessed against three key criteria: • Suitability: .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. experience. finance.

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 .

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: 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 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: 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.

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
tutor2u

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

tutor2u

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
tutor2u

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. Waitrose etc. sales figures and developments at Morrisons between now and June 2011) articles and views about developments in supermarket retailing across the world Web 2.) Rises and falls in the Morrison share price on the London Stock Exchange – – – tutor2u .0 information (blogs. Asda. 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.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. internet discussion forums. customer feedback sites etc. so you can expect updated accounts. twitter. J Sainsbury.

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 .

Sign up to vote on this title
UsefulNot useful