How Albertson's can beat Wal-Mart
Length: 960 words (2.7 double-spaced pages)
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While several things have been done to help their value chain, there are still several areas that need updates/changes. Automated check outs seem to be working for Albertson's as well as others in the industry. Investing in this new technology would be a benefit for Albertson's. One other area they need to consider updating is how they transmit information & orders to suppliers. By making the ordering & inventory reporting systems faster & more automated, Albertson's could drastically reduce costs and become more competitive with Wal-Mart.
Albertson's main competitor is Wal-Mart. The biggest component in this rivalry is product cost and price. Because of their superior supply chain and extreme buying power, Wal-mart is able to sell at lower prices and obtain higher profit margins. Another area of competition between the companies is the location and services available. Due to the extended services Albertson's offers such as a butcher, baker, and gourmet coffee bars, they are able to outperform Wal-mart in urban areas. Other than the current contenders in this market, I don't feel that Albertson's has any major worries such as new entrants or other substitutes.
2) Information systems plays a very significant role in Albertson's business strategy. From corporate office functions to customer interactions, they are committing to providing leading edge technology. They are taking their core business functions and enhancing them with technology from, not only their own industry, but also others. One example of this is the store sending text messages to customers when their pictures & prescriptions are ready. While IT plays a big role, Johnston's second major area of concern is the "brain power" at the executive level in the company. By hiring some of the smartest, experienced people in the industry, Johnston is also relying on brilliant ideas and smart executive plans/projects to propel his company to the head of the industry.
These different systems provide value to Albertson's in the form of additional sales, profit, employee satisfaction and customer loyalty. Continuous updates to the supply chain help them to reduce costs and earn higher profits on their sales. The new financial systems help to reduce costs and also increase employee satisfaction by making it easier and efficient for employees to do their work in this area. The update to the human resource system also helps to boost employee morale by making it easier to access information, track progress and view personal records. Together, these IT systems increase value for Albertson's in many different areas help move them closer to their giant competitors.
3) In comparison to Wal-mart, Albertson's is both similar and different. Both of these companies are in business to sell groceries. However, Albertson's strategy is to provide value in the form of personalized services while Wal-mart is concerned mainly with providing convenience and low prices. Currently, both are achieving certain successes. Wal-mart is constantly reducing their costs, making them the low cost provider while still maintaining industry leading margins. Albertson's is also achieving success in urban areas, where Wal-mart is unable to place its huge "box" stores. They are able to provide smaller stores with reasonable prices, and personalized services.
In the future, Albertson's will obtain success from their relentless efforts in upgrading IT systems in every area of the company. The new CTO, Bob Dunst, has said that they plan to overhaul 90% of the companies applications by 2007. This plan as well as their exploration into new in-store technologies will provide success for them in the future.
4) Albertson's strategy success will be hindered by the fact that they are attempting to compete with Wal-mart's prices and conveniences. Their core competency is providing personalized services like the butcher & baker at low costs. Johnston is going to struggle to move the competencies from where they are now to a technologically advanced supermarket.
A factor that is going to help Albertson's achieve their strategy goals is the dedication of their CEO to obtaining the top executives in the industry to run their company. Another factor that will help them is that Albertson's has been updating their IT systems along the way. This means that each step up they take is not a drastic change and makes it easier to train employees and integrate the necessary changes.
5) I believe that Albertson's strategy will work if they are able to concentrate their efforts in markets that are more suited to their services. Albertson's will not be able to compete with the big Wal-mart stores because of their huge buying & negotiating power with suppliers. Wal-mart is able to buy products cheaper due to the large volume they purchase. For Albertson's to be successful, they will have to focus on the areas where Wal-mart is not able to place a large store. Their competing efforts should be focused on the smaller Wal-mart marketplace stores. Albertson's will be able to focus on their core competencies while still striving to become more efficient and lower costs so that they are competitive with Wal-mart's.