Presentation is loading. Please wait.

Presentation is loading. Please wait.

Objectives today Give you a brief introduction to Eurocash

Similar presentations

Presentation on theme: "Objectives today Give you a brief introduction to Eurocash"— Presentation transcript:

0 Competitive Strategy Geoff Crossley
CEO, Eurocash Food Service & Gas Stations Group Director, Investor Relations October 2009, Poznan

1 Objectives today Give you a brief introduction to Eurocash Share a personal view of the changing context we strategize in Sum up the teachings of Prof.M. Porter of Harvard Business School Illustrate how to apply basic concepts Get some interaction with you

2 Eurocash – Market leader consolidating a fragmented sector
Eurocash Group sales and market share evolution EUROCASH GROUP Self-financing, net cash position Relatively limited credit exposure Central head office synergies Experienced management team Wholesale market – key players (2008) Strategies in place to be leader in : C&C in small/medium cities Franchise systems, nationwide Impulse and Convenience for Traditional Shops and Gas Stations Food Service and HoReCa Source: Rzeczpospolita 500, Polityk a 500, GfK Polonia, company data, own estimates * Makro FMCG turnover estimated at app. 60% of Makro total ** Emperia - wholesale sales only; *** Ruch: non-press FMCG; C&C – Cash&Carry; D: Direct delivery; T: Tobacco; A: Alcohol; E: estimated data

3 Outlook for 2009 „Our strong balance sheet allows us to look at 2009 as a year of opportunity, when weaker market participants will face real challenges” Luis Amaral CEO Cost & price leadership Sources of future growth LFL and market share growth Strict cost control and focus on productivity gains Low CAPEX Cash&Carry: 6-8 new stores p.a. Low exposure to credit sales Delikatesy Centrum: 80+ new franchise stores (new regions) No debt – cash + unutilized credit lines available McLane: more sales to gas stations development of food service Stable earnings and focus on cash (negative working capital) KDWT: growing non-tobacco impulse

4 Phases in recent memory of working life
The changing context for Strategy formulation Postwar to 60s 70s, Oil-shock 80s 90s 00s? Business Context General growth Common Market Job was for life Business trends Diversify Divisionalize Discontinuity Different impact depending on energy- intensity of industry Portfolio Planning Resource allocation Uk led privatisations Defeat of unions First use of Pc.. Outsourcing Productivity thru People Arrival of Private Equity in Europe Collapse of Soviet Union Europe 92 open borders EU enlargement, Euro Oil at 9 USD Financial deregulation Globalisation, emerging mkts Start of Venture Capital in EU Technology-based productivity growth Cost cutting Operational excellence Securitisation Leverage Bubbles Oil at 140 $ Crashes ?????

5 XXI st Century Competitive Context
Falling barriers to competition Decreasing Scale effects Supremacy of Knowledge Assets & Skills Company More exigent customers & micro-segmentation Compression of Time and Space Technological Progress

6 Europe in the Era of Total Competition Porter’s Themes :
1. Distinguishing Strategy from Operational Effectiveness 2. Shaping Industry Structure 3. Choosing a Distinctive Competitive Position 4. Positioning and the Value Chain Trade-offs 6. Continuity in execution

7 Determinants of Company Performance
Operational Effectiveness Determinants of Company Performance Functional (e.g., marketing, production) excellence Eliminating waste and achieving greater output from existing resources Stimulating continuous organisational improvement Executing closer to the productivity frontier

8 Determinants of Company Performance
Strategy Operational Effectiveness Creating a unique and sustainable competitive position Transforming or redefining competition in the industry Improving operational effectiveness preoccupies companies a lot of the time ..but Companies must shift their attention to strategy to secure long-run success

9 The central goal of a firm is superior long-term return on investment
Competitive Strategy The central goal of a firm is superior long-term return on investment The fundamental unit of strategic analysis is the industry Company performance results from two distinct causes Industry Structure Relative Position Within the Industry

10 Determinants of long term sector profitability
Petrol Convenience Stores High Street outlets with location Fast Food outlets Supplier direct delivery Outsourced Chain Operators Threat of subtitute Products/services Slowdown, Wholesale consolidation Rivalry of Category specialists, Regional and Full-range players, Rivalry between existing competitors Bargaining Power, Suppliers Bargaining power of Oil Cos Tobacco and beer/ strong alcohol producers Use of Bid dynamics and contractual service penalties Threat of new entrants Emperia LogPol

11 Positioning and Segmentation
Customer Group (Needs, Accessibility) Value Chain (Activities) Positioning is the simultaneous choice of which group of customers to serve, which array of product varieties to offer, and the particular mix of value (price and non-price) to deliver

12 Actionable segmentation: basic principles
Clients Occasions Consumers Products Geographical areas Needs Services Competitors Transactions Channels Dimension A? Dimension B?    Chosen dimensions must be exhaustive Demographics Situational Behavioural Requires intuition to map primary dimensions Must produce differentiated segments that are actionable Recognizable clients groups Needs versus observable discriminating characteristics Facilitates understanding of needs, how to serve Allows segments prioritisation

13 Positioning and Segmentation
Customer Types / Purchase Occasions Competitor B Competitor A Product / Service Varieties Competitor C Positioning choices show in the particular configuration of activities adopted Essence of strategic positioning: making choices that are different from those of rivals Competition occurs primarily in the areas of overlap

14 Positioning and the Value Chain
Support Activities Firm Infrastructure (e.g. Financing, Planning, Investor Relations) Human Resource Management (e.g. Recruiting, Training, Compensation System) Technology Development (e.g. Product Design, Testing, Process Design, Market Research, Material Research) M Procurement (e.g. Raw Materials, Advertising Space, Health Services) a r g Inbound Logistics (e.g. Data Collection, Material Storage, Customer Access) Operations (e.g. Component Moulding, Branch Operations, Underwriting) Outbound Logistics (e..g. Order Processing, Warehousing, Report Preparation) Marketing & Sales (e.g. Sales, Proposal Writing, Advertising, Trade Shows) After-Sales Service (e.g. Installation, Customer Support, Repair) i n Primary Activities Companies are collections of discrete activities, in which competitive advantage resides Discrete activities are often complementary Positioning choices are reflected in an internally consistent configuration of activities

15 Groups of clients,Needs, Differentiation (Non-Price Value )
Positioning and Competitive advantage - Eurocash service to Petrol Chains Positioning choice: which group of clients to serve? which range of products to offer? what mix of Value(price/non-price) Groups of clients,Needs, Value Chain (Activities)) Buying Power Logistic cost Service level All in one truck E-invoice Error reduction Lower Cost Are Petrol Chains interested only in minimised Bid Prices ? (other factors only “Nice to have”) ? Are factors reducing Total cost for the Client relevant? Is “Lowest Total Cost” a relevant Strategy for the Wholesaler? Is there scope for a Value-Added Service Strategy, (implying a price premium) ? Competitive Advantage Differentiation (Non-Price Value )

16 Positioning and the Value Chain Eurocash Petrol Stations service
Support Activities Firm Infrastructure Human Resource Management Technology Development M Procurement a Long term advantage depends on the complementarity of multiple activities that exceed specific skills or resources r Inbound Logistics g Marketing & Sales i Operations n After-Sales Service Outbound Logistics Primary Activities McLane’s particular mix Hi volume in common producers gives buying power Full-range means bigger drop and greater Warehouse throughput Multi-temp allows consolidation of chilled and frozen volume with ambient Common, hi volume skus means better use of space and capex Use of technology to make life simple ties the client Multi-client back-office dilutes cost to serve

17 Positioning - IKEA, Sweden
Customer Group (Needs, Accessibility) Value Chain (Activities) IKEA focuses on young, price sensitive, first-time buyers Low-priced, modular, ready-to-assemble designs In-house design of all products Wide range of styles in huge warehouse stores Self-selection / Large inventories Extensive information in the form of catalogues, do-it-yourself videos, explanatory ticketing, and assembly references Long hours of operation Suburban locations with large parking lots Self-transport

18 Complementarities at IKEA
Staff Productivity Customer Behaviour High traffic store layout designed for impulse purchasing Limited Sales Staffing More impulse buying Explanatory catalogues, informative labelling and displays Suburban locations with large parking lots Most items in inventory Self-selection from warehouse; self-assembly Self-transport by customers Ample inventory on site Modular Kit Concept Low Manufacturing Cost ‘Knock-down’ kit packaging In-house design focused on cost of manufacturing Modular designs Ample year-round stocking Ease of transport and assembly Increased likelihood of follow-on purchase 100% sourcing from long-term suppliers Increased variety with ease of manufacturing

19 Positioning Tradeoffs - IKEA, Sweden
Typical Furniture Retailer Low-priced, modular, ready-to- assemble designs - no custom options Centralised, in-house design of all products Furniture design and manufacture driven by cost Wide range of styles in huge warehouse stores Self-selection / Large inventories Suburban locations with large parking lots Extensive information in the form of catalogues, do-it-yourself videos, explanatory ticketing, and assembly references Higher priced, fully assembled products - some customization of fabrics, colours, finishes Furniture purchase and merchandising only Primary design and manufacturing focus on image / style / materials Medium sized furniture showrooms Low inventories / order placement typical Urban / suburban locations Product information provided by store sales personnel

20 Complementarities and Competitive Advantage
The presence of complementarities make competitive advantage far more sustainable than advantages arising from discrete activities or “competencies” Rivals must match a whole array of activities and the way they are integrated Complementarities amplify the competitive penalty of small shortfalls in matching individual activities Achieving complementarities is difficult organisationally Strong complementarities also elevate the tradeoffs between positions Complementarities also allow organisational structure and management process to be better aligned with strategy

21 Why Companies Fail to Choose Strategies
Economic The need to choose is not understood Operational effectiveness is confused with strategy Better productivity creates the illusion that the best of all worlds is possible Choice appears to constrain sales growth Choice limits flexibility Organisational Stalemate between factions / functions within the organisation who are championing different objectives Organisational incentives punish choices but tolerate mediocrity (if the competitors are doing it . . .) Denying tradeoffs is seen as motivating greater organisational improvement

22 Strategy is a race to one ideal position
Strategic Mindsets Strategy is the creation of a different position where competitors are unable or unwilling to compete Strategy is a race to one ideal position Long-run advantage depends on complementarities across many activities that transcend (and give value to) discrete capabilities or resources Key success factors or core capabilities determine the winner

23 Strategic Continuity and Continuous Improvement
Strategic continuity over sustained periods contributes strongly to sustainable competitive advantage Reinforces identity with customers and channels Builds truly unique capabilities and skills Sharpens understanding of tradeoffs Fosters strengthening of complementarities Facilitates improvements in operational effectiveness Strategic continuity must be combined with continuous improvement in implementation There is often a tension between achieving sustainable advantage and maintaining the flexibility to respond to any structural change

24 Fundamental Errors in Competitive Strategy-M. Porter
Operational effectiveness instead of strategy Ignoring or only reacting to industry structure “Best of all worlds” instead of tradeoffs Competencies instead of strategies Flexibility instead of continuity Sloppy, incoherent implementation

25 Final Words of advice Watch macro-economic game-changers: build your own memory for later déjà vu moments Use of Debt, health of Balance sheet, Relative interest rates, Exchange rate swings Opening of Trade Barriers Drivers of the price of Oil... Etc Watch for the Herd instinct of managers All Rush into new markets, then overcapacity results, and withdrawal Blind copy of their home business model, not adapting to new country Corporatist , not entrepreneurial Prone to buzzwords and fads- form your own view. Nothing stays the same: When in doubt, steer with your Values and a simple check-list

26 Thank you for your attention!

Download ppt "Objectives today Give you a brief introduction to Eurocash"

Similar presentations

Ads by Google