Companies apply various strategies such as differentiation strategy and cost leadership strategy to attract more customers and gain a competitive advantage over rivals. However, these efforts to appeal to more customers can be contrasted with other approaches that target a niche of potential customers. Kroger has continued to thrive in the grocer-stores market despite the stiff competition from other fast-rising stores such as Trader Joe and Whole Foods. Over the years, this supermarket has posted higher sale values than the other stores to become the country’s top retailer for natural and organic food products (Lutz, 2015). One of the strategies that this store has been using to retain the top spot despite the transition of the industry away from supermarkets is to offer a variety of organic food.
Kroger is known for qualities such as their loyalty program, excellent customer service, as well as an extensive selection of products. This supermarket chain manages to keep the prices low for most of its products because of the adopted strategy of offering private-label products. This strategy has also succeeded in other supermarkets such as Aldi and Costco. However, other traditional supermarkets have been losing their customers to warehouse chains and grocery stores because they do not provide the desired assortment or value of products similar to that offered by Kroger. Boomers and millennial, for example, are more focused on food that is prepared with creativity (Lutz, 2015).
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The business strategy applied by Kroger can be described as best-value that incorporates a combination of attributes such as quality product and service, competitive prices, and appealing other features. Superiority in value and quality service delivery in the supermarket business requires a company to create and utilize unmatched resources and competencies. For this reason, Kroger can maintain relatively low prices without compromising on revenue. The ‘Customer First’ strategy used by Kroger is vital for driving up sales through effective application of economies of scale (The Kroger Co., 2017). Kroger has used this ‘Customer First’ strategy for the better part of the last decade by focusing on the assumption that the top desire for all customers is affordability. Here, the company offers prices that are lower than those in the traditional grocers and other competing supermarkets.
The business level strategy applied by Kroger is designed to have a broad reach in the market. This company is able to serve customers from all income levels through the aspect of cost leadership. For example, the ‘Check This Out’ and ‘Psst’ brands, which were previously known as Kroger Value, are available for the lower income level customers. Through these brands, the customers can get basic food and health necessities using a simple budget. For the middle-level income customers, the Kroger Brand is available. When compared to the two lower income level brands, the Kroger Brand offers extras in value such as gluten-free and organic properties. The Private Selection Brand is available on the high end of the customer-income level spectrum variety and value is added over the brands from the other levels. This top level has flavors and selection of products that would not be found in the value level. Customers who shop at Kroger have the advantage of being able to buy a variety of products from one place because of the array of options available.
Kroger has introduced various measures to ensure that they stay ahead of the competition. For example, this company has the Simple Truth brand that serves the organic needs of the customers to keep abreast of competition from Whole Foods. Overall, Kroger has been able to compete effectively with other firms by introducing these unique packages that are oriented to cater to the needs of the customers.
Kroger delivers a broad array of services and products such as jewelry, organic foods, pharmaceutical services, and groceries among others. This availability of variety enables the customers who shop at Kroger to get as much products and services as they want from one location. The strategy to offer one-stop shopping solution has not only provided convenience for the customers but also established a steady flow of the revenue for the company (The Kroger Co., 2017). In addition to that, Kroger offers different store formats where customers can make selections according to their preferences. For example, customers who after value will be likely to visit the price impression warehouses whereas those considering to purchase organic products or premium items might visit the combination store. The diversity in the type of stores made available to the customers has enabled the firm to grow to become the biggest grocery store in the US.
Lately, Kroger has adopted a strategy of developing private label products through the use of “Good, Better Best” slogan These products, which also include those in the organic space, have benefited the company by contributing about a quarter of the total sales made in 2015 (Lutz, 2015). One of the company’s private label products is the Simple Truth label which is among the leading brands in the country. The fact that these products have a higher profit margin compared to natural products has been beneficial to the company. Furthermore, the success of these private label brands has placed the company in a favorable bargaining position with suppliers since those suppliers have to account for the fact that Kroger has an alternative source of products for the customers. Therefore, this bargaining position ensures that Kroger gets favorable terms that translate to market advantage over the competitors in the grocery market.
Kroger has always excelled at innovation. This company has been involved in several innovative projects such as the reinvention and reconfiguration of stores to align them with the requirements for organic and healthy foods through the Simple Truth brand. Kroger has been able to excel at innovation because of its ability to make changes in response to trends and shifts in the behavior of the customers as well as the competitors (Berthene, 2019). Currently, the innovative drive in this company is focused on the incorporation of e-commerce through the digitalization of operations (Berthene, 2019). For example, this company has a home delivery service to over 3,000 locations and another service where customer can make order online and collect them in the stores.
Another area where Kroger is making process is the digital couponing system. Here, the company is using a mobile application to make digital coupons and establish remote connections with more customers. Kroger uses this system to exploit the tendency of customers of being responsive to deals and offers (Berthene, 2019). Here, the company is able to dominate the market by pushing sales and driving traffic to its stores in real time. In addition to that, Kroger incorporates the immediacy and efficiency of digital engagements with great insights on shopper preferences to excel in customer engagement and personalization of products.
A company needs to make the appropriate decision on the right generic strategy to use. Having the right strategy enables a company to drive other related strategic plans and actions and set the tone for the pursuit of a competitive advantage over other companies in the same line of business. The strategies for best-value provider involve a combination of low-cost strategic emphasis with a similar strategy on the provision of more than minimal quality products and services. The aim here is to create a competitive advantage for the company by giving the customers more value for their money.
This approach involves matching the close competitors on critical attributes such as quality of products, service provision, performance, as well as a variety of available features, and beating them on the ability and cost of incorporating those attributes to the products. Therefore, the best-value provider strategy is best applied in a market that has buyer diversity. In such a case, buyers make their choices according to the value and price of products from different companies. A focused strategy, on the other hand, offers a competitive advantage to a company by enabling the company to offer lower prices than the competitors when serving customers from the target market niche. This strategy also allows a company to develop functional ability to offer the niche customers unique and differentiated products according to the personal preferences of the customers, and hence gain an advantage over the competitors.
Various factors make a focused strategy that is based on either differentiation or provision of low-cost products to be more attractive. First, a broad target market niche translates to more profits as well as the potential for business growth. Second, when it is costly for multi-segment competitors to put measures in place to meet the needs of the target market with specialized requirements while satisfying the requirements of the mainstream customers, then the focused strategy becomes more attractive. Third, this strategy is useful when there are more than one target market niches with strengths and capabilities that make a good match with the rival companies. Finally, a focused strategy becomes attractive for application when competitors are making attempts to replicate specialization in the same target market.
References
Berthene, A. (2019). Kroger’s Rodney McMullen leans in to technology to win grocery sales online and in store. Internet Retailer . Retrieved on 28 April 2019, from https://www.digitalcommerce360.com/2019/01/14/kroger-ceo-outlines-its-digital-investments-at-nrf/
Lutz, A. (2015). A grocery chain no one talks about is becoming Whole Foods' biggest threat. Business Insider . Retrieved on 28 April 2019, from https://www.businessinsider.com/krogers-strategy-to-take-over-grocery-stores-2015-3?IR=T
The Kroger Co. (2017). Kroger Outlines Plan to Redefine the Way America Eats and to Deliver Value for Customers & Shareholders. PR Newswire Association LLC . Retrieved on 28 April 2019, from https://www.prnewswire.com/news-releases/kroger-outlines-plan-to-redefine-the-way-america-eats-and-to-deliver-value-for-customers--shareholders-300534819.html
