Migros Essay Example | Topics and Well Written Essays - 2000 words

Migros - Essay Example The current market penetration demonstrates 40% of households shop exclusively at Migros for food and 92% of households shop once per week. Given recent developments, the competition appears poised to move into Migros’ territory; and Migros management plans to anticipate the encroachment with appropriate strategies. This report responds to that potential encroachment with strategies and recommendations for action, and a plan for implementation. First, the situation is defined. COMPETITIVE SITUATION Migros is currently the top performer in Switzerland. Coop is the second largest retailer. With fewer retail stores, Migros earned 25% market share of food and 18% overall consumer goods. Coop, with twice as many outlets, enjoys a 15% market share. Three large international companies plan intrusions into the Swiss market. Carrefour, from France, Europe’s largest retailer, currently operates 12 supermarket locations in Switzerland and envisions several more in the near term. T wo German firms, Aldi and Lidl, expect to attempt to gain entry into the Swiss market. Legal and regulatory issues confound foreign entry; however, the European Union agreements may lead to loosening of those restrictions. The three new competitors compete on price utilizing the low service, big box retail concept. As Europe’s largest retailer and second in the world to Wal-Mart, Carrefour has the financial strength and management systems to compete. Aldi and Lidl view the 8% discounters’ share of the market incredibly appetizing compared with Germany’s 40% share. That gap looks exploitable from their positions. Traditionally, and certainly among the top retailers now, qualitative competition has been the standard. New regulations and new competitors, independently or combined, may lead to price cutting and poorer agricultural standards in the food supply. Migros must prepare to respond. Migros management has identified three strategies in response to the challe nge these competitors present. First, improve operational efficiency, logistics, purchasing or organizational structure and pass the cost savings to the buyer. Second, expand the budget line of vertically integrated products and develop cost leadership. Third, compete on premium lines and increase sales of ethical/environmental products. In response to these strategies, this report offers the following logic. The third strategy is sound, but not responsive to the threat of discounters. The investment required to continue growing the engagement and premium lines is insignificant compared to returns so far. Migros not only owns the Swiss premium market among large retailers, these products are a growing source of export business. Stay the course on premium products seems like the best advice. The second strategy involves expanding the budget lines, providing broader choices of products at budget pricing bears investigation, and responds to the price cutting competitors. The first stra tegy is quality business thinking at all times; can we be more efficient? Migros surpasses the other competitors for efficiency in management and operations now. It is unlikely significant gains would come of an operational audit. This chart demonstrates the point. Migros is second only to Coop in gross profit as a percentage of gross sales. Migros