Shop-Rite uses overall cost leadership. Defined by Porter, as offering the same or better quality product or service at a price that is less than what any of the competition is able to do. They basically want to be the top supermarket out of their competition such as Pathmark, FoodTown, A&P, Stop&Shop, and more. They are even competing against Super Wal-Mart’s because they also are beginning to carry much more supermarket items similar to Shop-Rite.
Since Shop-Rite uses an overall cost leadership, IT can be an effective tool. IT can tighten supply chain systems, help you capture and assimilate customer information to better understand buying patterns in an effort to better predict product inventory and shelf placement. The Price Club card comes in handy when trying to figure this out and also whenever a product is rung up and sold; it shows in the inventory when they are purchased and what products interest customers.
The Five forces model was designed by Michael Porter and it has been used by businesses to help people understand the relative attractiveness of an industry and the industry's competitive pressures as it relates to: 1. Buyer power, 2. Supplier power, 3. Threat of substitute products or services, 4. Threat of new entrants and 5. Rivalry among existing competitors.
Buyer power refers to how high or low the customers buying choices are. In Shop-Rite the buyer power is relatively high as customers can easily go elsewhere to purchase the same products that Shop-Rite offers with the exception of their Price Plus card which is their own loyalty program. Shop-Rite’s loyalty card allows you to receive disco
unts on sale items. Some products are already put on sale for that weekly sale but some require you to use your loyalty card to receive additional discounts on your purchase order. They try to reduce buyer power by selling high quality products cheaper than what customers would find elsewhere so customers would purchase their merchandise.
Supplier power is the opposite of buyer power; it refers to how high or low the buyer’s choices of who to purchase from is. Shop-Rite has a low supplier power as it has a variety of suppliers whom it can purchase from and it maintains this low supplier power by having its suppliers compete by auctioning or bidding on areas where they want their products to be marketed and sold. One example would be Pepsi and Coke Cola because they continually try to outbid one another for specific areas of the store. Location of a product is also a key factor. If your product is no
t in the peripheral vision of customers, then don’t expect high sales and revenue coming in.
Threat of substitute products or services is high or low depending on how many alternatives there are to certain products. Shop-Rite has a low threat of substitute products because many of their products have substitute items. For example Tylenol, Shop-Rite’s substitute for of Tylenol would be the acetaminophen. The more items they are able to provide substitutes for, the more sales they will be producing.
Threats of new entrants are high when it is easy for new competitors to enter a market. Shop-Rite’s threats are somewhat high when new establishments of competitors are built in the same area. This type of situation recently occurred, when a certain Shop-Rite that has been around in the Ocean County area for quite some time and a Super Wal-Mart was being built right next door. This was a huge red flag for Shop-Rite. They had to strategize what was going to take effect so nothing would greatly harm their sales.
Rivalry among existing competitors refers to how much competition is faced in a market. Shop-Rite has intensive competition from other supermarkets such as Pathmark, FoodTown, Stop&Shop, and more. But there are also small shops that you can’t forget about. All of these companies are in the food industry and are against and competing with Shop-Rite. To reduce this Shop-Rite tries to distinguish itself from its competition by emphasizing low prices and good customer service, “One place. Your place, Shop-Rite.”
Switching costs are costs that make customers reluctant to switch to another product or service supplier. Shop-Rite uses switching costs by providing the lowest price as possible on most of its products so that customers would be reluctant to switch to a higher costing competitor. Shop-Rite’s loyalty card has plenty of benefits. Either if it’s used to accumulate points to be redeemed for prizes or to reduce your bill, receiving coupons that would interest you, outstanding savings every time you present the card at check out, Shop-Rite is pleasing the customer and bringing them back for more. They also are involved with going green. They have mesh bags you can purchase and every time you use the environmental friendly bags, you receive 5 cents off your total bill for each bag you use. You’re saving the earth while saving yourself some money, not bad.
Shop-Rite uses entry barriers which help make it hard for companies to enter the market. They use this in their technological advantage by purchasing cheaper and in bulk than its competitors so they could sell at a low cost. By doing so, this process takes a lot of time, research and money to establish and build relationship with their suppliers. A company trying to enter this market would have to have a significant amount of money, technology, as well as connections in order to efficiently compete in this industry.
Shop-Rite uses the customer relationship management (CRM) system as one of their major business initiatives. CRM uses information about customers to gain insights into their needs, wants, and behaviors in order to serve them better. Cus
tomers interact with companies in many ways, and each interaction should be easy, enjoyable, and error free.
To power Shop-Rite, they use SAS solutions software for retail turn data about customers, merchandise and operations. SAS software is a vital part of Shop-Rite’s IT as it allows them to make more informed decisions and gain competitive advantage over its competitors in terms of targeting potential markets for products.
Shop-Rite has bottom-line initiatives, which focuses on minimizing expenses. They make this possible by optimizing manufacturing processes, decreasing transportation costs, reducing the costs of human capital, minimizing errors in process, which are a few of the many tasks. A bottom-line strategy is very similar to Porter’s strategy of overall cost leadership, which Shop-Rite follows. Also from an IT point of view, you must form a business strategy that addresses the role of IT in affecting both the top-line and bottom-line, though not necessarily equal.
An organization can place the IT function in a number of ways and these 3 would be the most common: top-down silo, matrix, and fully integrated throughout the organization. Shop-Rite has a structure similar to that of the top-down pattern. With this approach, Shop-Rite created an IT department devoted exclusively to everything related to technology such as budgeting, project management, capacity, processing, and so on. This type of management style projects the company being well-built in command and control. Functions like finance and marketing must go though the IT department for approval of new projects, the generation of ad hoc reports, support functions, and more.
Companies can adopt one of two philosophical approaches to IT. A company can choose to be centralized also known as “wait and see” adopters or rather decentralized also known as “early it adopters”. Shop-Rite uses the centralized approach. They require the demonstration of considerable return on investment before first adopting a new technology within the IT function and then deploying that technology to the rest of the organization.
Shop-Rite’s leading form of m
arketing for their customers comes from their weekly circulars along with their television, radio, and newspaper advertisements. Wakefern must seek wholesale buyers using other forms of marketing such as e-marketplaces, which include www.supplierlist.com and www.alibaba.com. As far as the types of payment that Shop-Rite allows for online customers they will accept all major debit and credit cards from Visa, MasterCard, American Express, and Discover. Shop-Rite has also recently started using PayPal for orders placed online.
While Shop-Rite is one of the leading grocery centers in the northeast, the company also delivers with e-commerce. Shop-Rite mainly deals with a Business-to-Consumer Internet business model, as it is a company selling to the general public without human interaction. In certain areas, a customer can shop for their entire grocery list with just a couple clicks of a mouse. Unfortunately, this service is not available at any local Shop-Rites as the closest store that offers “Shop-Rite From Home” is about twenty miles away. All consumers can however order electronics, holiday dinners, and party planners on their home computers. Shop-Rite’s parent company, Wakefern, does present a Business-to-Business Internet business model as they supply smaller businesses at a wholesale level. Smaller businesses involved with Wakefern can also benefit from services such as transportation, financial support services, store development, and technical support.
Article
Written July 8, 2010
Spanish exchange students tour Warwick Shop-Rite
Us Americans take for granted many things in life. One would be a supermarket. In other parts of the world, believe it or not, they don’t have supermarkets filled with every necessity you might need. This shows Shop-Rite's business strategy of overall cost leadership. They are making wants and needs more simpler for the customer by having every necessity.
A group of foreign exchange students from Spain took a tour of Warwick’s Shop-Rite and was one of the highlights of their four-week stay in this area. It’s crazy to think that a supermarket would amaze people. When the students purchase bread or meat or produce in their home towns, they go to individual shops, like a bakery, that specialize in those products. Shop-Rite has almost everything you might need, from produce, meats, fishes, breads, pastries, hygiene products, grocery items, frozen, dairy, floral, and pharmacy. Also they carry stationary products, magazines, newspapers, books, cosmetics, toys and electronics. This store to the students is an all in one superstore. We are pretty fortunate to have all this in one stop and the students appreciated very much on their trip Shop-Rite.
Read more: http://strausnews.com/articles/2010/07/09/warwick_advertiser/news/22.txt
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