SWOT Case Study - Kroger

Strengths

• Sturdy Market Position - Kroger has weathered the economic recession with relative success due to the strong market position it had going in. Kroger held number one and number two market share position in 39 out of 42 major markets in 2009. The company competed with 1,418 other supercenters and has achieved at least a number three market share position in 35 of its major markets.
• • The company’s brand equity provides a strong competitive advantage over other firms. In 2009 Kroger was listed 82nd in the Global 500 Brand Ranking (Ranking the Brands.com), while the Reputation Institute listed it among the top 20 most reputable companies. This strength will serve the company well as it endures its most recent negative earnings forecast.
  • Three-pronged Branding Approach - Private selection, banner brands and Kroger value represent the company’s three-tiered branding approach. Specifically, the private selection brand strives to compete with national upscale brands, while Kroger value delivers quality items at lower prices. The banner brands consist of the company’s private label items like Ralph’s, King Soopers, and Kroger. The three-pronged approach enables Kroger to meet the demands of a wide range of customers and offers them savings not available with national brands.
  • Proficient Manufacturing Capabilities - Kroger operates around 40 manufacturing plants for processing, packaging and manufacturing its private label products. The company manufactured approximately 43% of its 14,400 private label items in its plants. Kroger’s inventory of manufacturing plants Include 18 dairies, 10 deli or bakery plants, five grocery product plants, three beverage plants, two meat plants and two cheese plants. These manufacturing capabilities allow for more efficient quality control and efficient distribution to stores.
  • Diversified Retail Product Inventory - Kroger product inventory includes a wide range of private and national brand products in a number of product categories including food produce, grocery, beverages, apparel, meat, jewelry, accessories, and general merchandise. The diversification strategy is also evident in its fuel service stations and financial services. This wide range of products and services enables the firm to create a one-stop atmosphere which facilitates frequent repeat visits for a number of purposes.

    Weaknesses

    • Vendor Quality Control Lapses - Kroger obtains a substantial portion of its merchandise from suppliers that it has limiter control over. As a result, a number of consumer alerts and product recalls have been necessary. . In the first quarter of 2009, Kroger recalled a number of products including Lawry fajitas spices, and Lian How chili garlic sauce. Other recalls include Banquet Pot Pies, Kroger California Seasoning Blend Garlic Powder and Kroger Special Seasoning Blend Lemon Pepper. Obviously these recalls especially those deemed hazardous to ones health serve to harm the company's brand image by reducing customer confidence and loyalty.
    • A Unionized Workforce - Kroger’s unionized workforce puts it at a competitive disadvantage when compared with its peers Wal-Mart, Sears or Target. Its competitors enjoy lower labor costs and other operating efficiencies. This environment often includes time-consuming labor negotiations and the formulation of agreements in order to avoid work stoppages. Each work stoppage comes with the potential to impact the bottom line.
    • Legal proceeding related to Ralph’s Grocery Company case - Kroger has faced a relatively long list of legal issues stemming from its acquisition of Fred Meyer and Ralph’s Grocery. Among them include a settlement in 2006 over illegal hiring practices that occurred during a 141 day labor dispute. Potential legal issues for Kroger have also loomed in connection with Ralph’s alleged improper accounting practices. Kroger is awaiting a decision by the Commissioner of the Internal Revenue Service with regard to a transaction between Ralph’s Holding Company and Ralph’s Grocery. A negative decision in the case could have substantial financial impact on Kroger.

    Opportunities

    • Increased Emphasis on Private Label Brands - Kroger continues to develop its private brands as a strategic asset. With a goal of decreasing its dependence on national brands, Kroger has increased promotions of its own products which include more than 14,000 brands. During the fourth quarter of FY2009, the company’s private label brands accounted for approximately 27% of the entire grocery sales. Private Selection, a private brand owned by Kroger, exceeded $1 billion in sales in FY2009. These brands have offered much appreciated savings to its customers during the economic recession.
    • Strategic Expansion Plans - Kroger plans on implementing an expansion plan which entails store relocations and store remodeling and new store openings. The Plan help the company enhance its in-store store productivity and to penetrate new markets. This in turn would allow Kroger to reach a larger customer base. Kroger has increased its capital outlay from $1.8 billion in 2007 to $2.1 in FY2009. The company is planning to spend around $1.9 to $2.1 billion during FY2010. Kroger hopes another by product is increase its operational productivity and reduced cost.
    • In-Store Health Clinic Program - Kroger is striving to better serve its customers by providing walk-in medical clinics and consumer health assistance in its stores. By partnering with The Little Clinic Kroger is able to offer the services of licensed nurses and certified physician assistants to diagnose treat and write prescriptions for common illnesses as well as for minor injuries. Kroger intends to implement the program throughout its stores and by doing so hopes to reap rewards of addition customer revenues.

    Threats

    • Increasing Labor Costs - The majority of the Kroger’s 326,000 employees are covered by collective labor agreements negotiated with local unions affiliated with one of several different international unions. Kroger employees have benefited from recent increases in the federal minimum wage and it is predicted they will also benefit from health care reform. These changes present financial challenges for Kroger and have the potential to negatively impact its operating costs, as well as profitability.
    • High Debt Burden - Kroger may find itself in a position where a substantial portion of its cash flow must be funneled into paying down its indebtedness. A large percentage of debt has gone toward the implementation of its restructuring, remodeling and new store opening projects. The current economic climate has curbed the willingness of the financial industry to refinance debt. This reluctance, coupled with its $8 billion debt load may hinder future growth opportunities for the company.
    • Dismal Economic Projections - The slumping economy continues to have a negative impact of consumer expenditures. The first quarter of 2009 registered a drop of 60.5% in the US Consumer Confidence Index, the score of 26 in March 2009 as compared to the score of 65 during same period in the previous year. Current job data outlined in The Conference Board Employment Trends Index for April 2010 indicates a moderate recovery may be underway; however a slow recovery may continue to stifle potential expenditures by Kroger customers.
      by Mkt Teachers

SWOT Case Study - Johnson and Johnson

Strengths

A Substantial Marketing Arsenal

Johnson & Johnson can call upon a network of subsidiaries armed with significant sales and marketing prowess, as well as expertise in a number of therapy areas. The company possesses a global sales force which serves to attract joint venture possibilities.

Strategic Acquisitions

Johnson & Johnson has maintained a stable financial position by utilizing cash reserves to finance timely corporate acquisitions. Its’ Triple –A Credit Rating represents a company able to take advantage of opportunities that arise without being limited by burdensome levels of debt.

Product Diversification

The Johnson & Johnson pharmaceutical portfolio, and ts large Medical Devices & Diagnostics (M,D &D) and Consumer Health divisions serves to reduce dependence upon any one area. The company plans to continue this broadening through 2008-14. This diversification allows a wider range of choice when pursuing opportunities with the greatest growth prospects.

Positive Revenue Growth Projections

The potential of an impressive number of new product launches and the promise of achieving forecast sales is said to bode well for Johnson & Johnson, helping it weather the recent decline in prescription pharmaceuticals and projecting a turn-around through 2010. An increase at 1.8% CAGR across 2008–14 is believed to be achievable.

Weaknesses

Dependence on the Success of Launch Products

Many new launch products are vulnerable to the uncertainty of regulatory review and ultimate market benefits may vary substantially from forecast, therefore, a reliance upon launch products potentially represents a threat to Johnson & Johnson’s outlook.

Reliance on Small Molecule Drugs

Compared to biologics, small molecules are notably more impacted by generic competition. As such, although the Johnson & Johnson is engaged in producing new small molecule products, when coming off-patent, declines are still forecast. This is particularly the case in the US, where generic erosion rates are most aggressive. Johnson & Johnson’s small molecule drug sales declined in 2008 and are forecast to fall further into 2012. Teses issues reflect concerns expressed across the pharmaceutical industry—the necessity of finding replacements for billion dollar products as they mature represents an daunting task.

Opportunities

Wide Range of Potential Cross-selling Opportunities

Johnson & Johnson is in a position to strategically develop a myriad of cross selling opportunities. Using the disease life cycle as a base the company could exploit its product line in CV, oncology, diabetes and I&I therapy to formulate linkages between patents and care-giving resulting in greater efficiency. Maximizing its balance between Pharmaceuticals, Diagnostics, and Medical Devices could result in increased revenues.

Potential to Exploit Biologics Market

The addition of further biologics to its portfolio can serve as a buffer as mall molecule patents expiries. J&J is experienced in the development and commercialization of biologics—including the therapeutic proteins Procrit and Natrecor, and monoclonal antibodies Remicade, ReoPro, Simponi and Stelara. This represents an opportunity to gain key IP, product rights or strengthen discovery capabilities. In July of 2009 Johnson & Johnson was selected by Elan to form a joint venture for the development and commercialization of these products. In addition, J&J acquired an 18.4% equity stake in the company.

Threats

Dependence on the Success of Launch Products

Many new launch products are vulnerable to the uncertainty of regulatory review and ultimate market benefits may vary substantially from forecast, therefore, a reliance upon launch products potentially represents a threat to Johnson & Johnson’s outlook.

Negative Impact of Recent Product Recalls

Johnson and Johnson has the misfortune of having to recall of more than 40 medicines recently. FDA inspectors required the company to recall the children's medications after discovering the company had not looked into dozens of consumer complaints about "black or dark specks" in Tylenol and other products. The company stands to take a hit to its sterling reputation as congressional lawmakers are blasting the company's competence and integrity.

by Mkt Teachers

SWOT Case Study -ITC

TC is one of India's biggest and best-known private sector companies. In fact it is one of the World's most high profile consumer operations. This SWOT analysis is about ITC. Its businesses and brands are focused almost entirely on the Indian markets, and despite being most well-known for its tobacco brands such as Gold Flake, the business is now diversifying into new FMCG (Fast Moving Consumer Goods) brands in a number of market sectors including cigarettes, hotels, paper, agriculture, packaged foods and confectionary, branded apparel, personal care, greetings cards, Information Technology, safety matches, incense sticks and stationery. Examples of its successful new FMCG products include:

• Aashirvaad - India's most popular atta brand with over 50% market share. It is also present in spices and instant mixes.
• Mint-o - Mint-0 Fresh is the largest cough lozenge brand in India.
• Bingo! - a new introduction of finger snacks.
• Kitchens of India - pre-prepared foods designed by ITC's master chefs.
• Sunfeast - is ITC's biscuit brand (and the sub-brand is also used on some pasta products).

Strengths

ITC leveraged it traditional businesses to develop new brands for new segments. For example, ITC used its experience of transporting and distributing tobacco products to remote and distant parts of India to the advantage of its FMCG products. ITC master chefs from its hotel chain are often asked to develop new food concepts for its FMCG business.

ITC is a diversified company trading in a number of business sectors including cigarettes, hotels, paper, agriculture, packaged foods and confectionary, branded apparel, personal care, greetings cards, Information Technology, safety matches, incense sticks and stationery.

Weaknesses

The company's original business was traded in tobacco. ITC stands for Imperial Tobacco Company of India Limited. It is interesting that a business that is now so involved in branding continues to use its original name, despite the negative connection of tobacco with poor health and premature death.

To fund its cash guzzling FMCG start-up, the company is still dependant upon its tobacco revenues. Cigarettes account for 47 per cent of the company's turnover, and that in itself is responsible for 80% of its profits. So there is an argument that ITC's move into FMCG (Fast Moving Consumer Goods) is being subsidised by its tobacco operations. Its Gold Flake tobacco brand is the largest FMCG brand in India - and this single brand alone hold 70% of the tobacco market.

Opportunities

Core brands such as Aashirvaad, Mint-o, Bingo! And Sun Feast (and others) can be developed using strategies of market development, product development and marketing penetration.

ITC is moving into new and emerging sectors including Information Technology, supporting business solutions.

e-Choupal is a community of practice that links rural Indian farmers using the Internet. This is an original and well thought of initiative that could be used in other sectors in many other parts of the world. It is also an ambitious project that has a goal of reaching 10 million farmers in 100,000 villages. Take a look at eChoupal here http://www.itcportal.com/agri_exports/e-choupal_new.htm

ITC leverages e-Choupal in a novel way. The company researched the tastes of consumers in the North, West and East of India of atta (a popular type of wheat flour), then used the network to source and create the raw materials from farmers and then blend them for consumers under purposeful brand names such as Aashirvaad Select in the Northern market, Aashirvaad MP Chakki in the Western market and Aashirvaad in the Eastern market. This concept is tremendously difficult for competitors to emulate.

Chairman Yogi Deveshwar's strategic vision is to turn his Indian conglomerate into the country's premier FMCG business.

Per capita consumption of personal care products in India is the lowest in the world offering an opportunity for ITC's soaps, shampoos and fragrances under their Wills brand.

Threats

The obvious threat is from competition, both domestic and international. The laws of economics dictate that if competitors see that there is a solid profit to be made in an emerging consumer society that ultimately new products and services will be made available. Western companies will see India as an exciting opportunity for themselves to find new market segments for their own offerings.

ITC's opportunities are likely to be opportunities for other companies as well. Therefore the dynamic of competition will alter in the medium-term. Then ITC will need to decide whether being a diversified conglomerate is the most competitive strategic formation for a secure future.

by Mkt Teachers

SWOT Case Study - Infosys

nfosys is one of the largest businesses in India with a turnover in excess of $4 billion in 2008. The company specializes in Information Technology (IT) and consulting. N.R. Narayana Murthy and six others started the company in 1981, and it is now the largest IT company in India with its headquarters in Bangalore (although it was started in Pune). It employs more than 90,000 IT professionals and was famously rated 'Best Employer in India.'

It operates in a number of business sectors from banking to retail, and its services tend to encompass end-to-end IT solutions which includes a whole bundle of added-value solutions from infrastructure to software engineering. This SWOT analysis is about Infosys.

Strengths

• Since the company is based in India its competitive advantage is enhanced. The Indian economy, despite weak economic indicators such as relatively high rates of inflation, has low labor costs. The workforce has relatively high skills levels in Information Technology. Couple these two elementstogether and you have an operational basis that offers low-cost based, highly skilled competitive advantage. Trained Indian personnel often speak very good English and are sensitive to Western culture, underpinned by India's colonial past.
• Infosys is in a strong financial position. The business turned over more than $4 billion in 2008. This means that it has the capital to expand, and also the basis to leverage potential investors.
• The company has bases in 44 global development centres, most of which are located in India, although the company has offices in many developed and developing nations. This means not only that Infosys is becoming a global brand but also that it has the capability to support the global operations of multinational clients.

Weaknesses

• Infosys on occasion struggles in the US markets, and has particular problems in securing United States Federal Government contracts in North America. Since these contracts are highly profitable and tend to run for long periods of time, Infosys is missing out on lucrative business. Added to this is the fact that its competitors do well in terms of securing the same Federal business (and one should also take into account that many of its competitors are domiciled in the US and there could be political pressure on the US Government to award contracts to domestic organizations).
• Despite being a huge IT company in relation to its Indian competitors, Infosys is much smaller than its global competitors. As discussed above, Infosys generated $4 billion in 2008, which is relatively low in comparison with large global competitors such as Hewlett-Packard ($91 billion), IBM ($91 billion), EDS ($21 billion) and Accenture ($18 billion).
• It is sometimes argued that Infosys is weaker when it comes to high-end management consultancy, since it tends to work at the level of operational value creation. Competitors such as IBM and Accenture tend to dominate this space.

Opportunities

• At a time of recession in the global economy, it may appear that some companies will reduce take up of services that Infosys offers. However, in tough times clients tend to focus upon cost reduction and outsourcing - with are strategies that Infosys offers. So hard times could be profitable for Infosys.
• There is a new and emerging market in China as the country undergoes a huge industrial revolution.
• The strategic alliance between Infosys and Schlumberger gives the IT company access to lucrative business in the gas and oil industries.
• There has been a trend over recent years for European and North American companies to base some or all of their operation in India. This is called an offshore service. Essentially there is a seamless link between domestic operations and services hosted in India. Examples include telecommunications companies such as British Telecom and banks such as HSBC that have customer service and support centres based in India. Think about the times that you have made calls to a support line to find that the adviser is in Mumbai or Bangalore and not in your home market.

Threats

• India is not the only country that is undergoing rapid industrial expansion. Competitors may come from countries such as China or Korea where there are large pools of low-cost labor, and developing educational infrastructures such as universities and technology colleges.
• Customers may switch to other offshore service companies in other countries such as China or Korea.
• Other global players have realised that India has the benefit of low-cost, highly-skilled labor that often speaks English and is culturally sensitive to Western practices. As with all global IT players, Infosys has to compete for skilled labor and this may have the effect of driving up wage levels, and making it more difficult to recruit and retain staff.

by Mkt Teachers