Discussion

Read Question: Complete discussion question

Question: Perform a ratio analysis of the four stores listed in Exhibit 2. Include at least four different ratio calculations. What can these results tell us about the generic strategy of each store? Reading Notes links https://engagelms.scranton.edu/learn/pluginfile.php/177755/mod_resource/content/1/Reading%20Notes%

Reading Notes for Trader Joe’s and Other Cases –

Revised 1/10/16

This week we begin our reading and analysis of cases through which we shall apply the concepts introduced in

the Case Guide. I selected each case with the intention of covering a broad spectrum of concepts across

several industries.

Individual cases in order of presentation are:

Week 3: Trader Joe’s Week 4: eHarmony Week 5: Patagonia Sustainability Week 6: Tesla

For week three, you have only one written assignment – the Trader Joe’s case. For these weekly cases, I

suggest that first, you read the week’s case in your HBSP case pack. Then, read the question/topic assigned to

you (see the Ask the Instructor post for question number assignments), and then, reread the case with your

question/topic in mind. Just a suggestion, you know what works best for you.

I hope you find this first case as interesting as I do. Trader Joe’s is one of my favorite cases and it will provide

us with an excellent start. Let me confess right up front, I have had a lifelong fascination with the grocery industry. You might suspect that the special appeal of this case for me comes from viewing of the many recent documentary films

that question the sources of our food. In fact, genetics influence me; my grandfather worked as a food broker from the

1920s through the 60s, while on the side and later full-time, my grandmother and he ran a neighborhood grocery store.

The store, once located not far from the University, remained in the family until early 2000, when my uncle closed it. My

earliest memories consist of crawling among the shelves and, as I grew older, of helping to restock them. I was young,

but not too young to notice their efforts at providing excellent product, maintaining customer relations and serving their

neighbors. My grandfather considered the store a community gathering place and worked to provide amenities, like

bagged lunch preparation, newspaper delivery service and in-house credit. Years later, when home recovering from

surgery, I experienced some of the same service from a grocer within walking distance from my apartment. Each day,

someone from the store called to check on me and the owner delivered fresh groceries weekly (free of delivery

charge). Since then, I’ve worked for a produce broker/distributor, who supplied mom-and-pop grocers, Wal-Mart, and

wholesalers and retailers of all sizes in between. I learned the industry’s supply chain, especially what it’s like to be a link

in the Wal-Mart value chain in the process. The grocery industry is as much about design and service as it is about

product. My experienced eyes observe grocery distribution and retailing far differently than the average consumer.

After studying this case, I suspect your observations will change, too.

My first visit to a Trader Joe’s left me perplexed and surprised. Much of this case might explain why. You don’t have to

see a Trader Joe’s to understand; just compare your own grocery shopping experience to what you read (or take a look

at the photos posted in Week Three. This week, we should try to determine core competences for operating in the

industry and a company’s distinctive competence in comparison to other competitors. The Trader Joe’s case helps us

hone skills in identifying the Distinctive Competence of a company, that one characteristic, process, or item (but not

product) that sets the company apart from and ahead of its competitors…in other words, its greatest strength.

Identifying the distinctive competence assists us in developing Key Aspects of Strategy necessary for competition in the

defined industry.

Trader Joe’s eschews the pervasive technology and data collection practices used by most companies in its industry. This

case gives us an opportunity to focus on competitor analyses, through use of Value Chain Analysis, Financial Analysis,

Five Forces Analysis, and like tools. As you read, think about how we might apply Value Chain Analysis to a company in

the grocery industry. Where (if anywhere) amongst the activities of the VC does Trader Joe’s add cost and are

customers willing to pay the associated price premium to obtain whatever added value this cost represents? What about

Trader Joe’s makes consumers willing to accept the inconveniences, known more politely as quirkiness? The new

perspective of Trader Joe’s forces us to focus on often-ignored aspects of a company’s value chain.

Please see Ask the Instructor for a link to a short video that demonstrates aspects of the Value Chain. We need to take

our understanding of the value chain quite seriously. Porter purports that the Value Chain is the series of interlinked

activities performed by a company. The performance of these activities and especially their interlinking can lead

frequently to competitive advantage, as competitive advantage is born more of process within a company than the

individual products (or services) or product lines it manufactures. In addition to determining the primary and secondary

activities of the company’s value chain, we need to think about the relationships among the activities. For example, how

does the supply of technically skilled labor connect to customer service activities; or, how is it that customers might

fulfill the role of both customer and supplier simultaneously? The light-hearted video is eleven minutes long and well-

worth watching. As you view the story, you should begin to identify the activities you see as part of a value chain.

In addition to reading the case to answer the question/topic assigned to you, please consider the following:

1. As you read, you may want to make some notes in a mini-SWOT exercise for yourself. Purposefully, I

have not assigned a SWOT to any student, as I believe it is important for everyone to think about this

type of analysis as part of case reading. Remember that strengths and weaknesses exist within a

company (internal), while opportunities and threats exist without (external). Note that most

opportunities and threats may exist not only for the company you analyze, but also for others in the

industry.

2. Think about identifying Trader Joe’s distinctive competence, its greatest strength. What is it that sets

Trader Joe’s apart from its competitors? What is it that Trader Joe’s has or does or combines that

competitors cannot match right now, or in the near future (five years or fewer)? When thinking of

Trader Joe’s itself, try to think of what attributes or processes exist that Trader Joe’s exploits to its

advantage, rather than the products produced by the processes. Notice that the distinctive

competence, which can lead to sustainable competitive advantage, has little to do with product, and

more to do with process, including the process of internal culture.

3. Consider the organizational structure of Trader Joe’s. What terms would you use to describe it? What

effect does the structure have on the identity of the organization and its operation in the marketplace?

What does it look like in comparison to what you know of its competitors? Or, of larger organizations,

in general?

4. Pay attention to the industry in which Trader Joe’s operates, the retail grocery industry. Do you agree

with its characterization and definition? You may wish to write a sample industry definition for

yourself. When you reach the end of the case, would you define the industry differently? Note that I

added some additional notes about Industry Definition to Ask the Instructor after Week One.

In particular, I want you to think about how an industry definition can change how we view

competition. For the sake of argument, say that,

Trader Joe’s operates in the brick and mortar retail grocery store industry in the United States. Excluded

from this industry are competitors whose grocery sales comprise less than 80% of their revenues.

Under this definition, some of its competitors might include Price Chopper, Whole Foods, Publix,

Albertson’s, Gerrity’s, Wegmans, WinCo, Market Basket, Stew Leonard’s, Giant, Hy-Vee, Von’s,

Safeway, HEB, Sprouts, Shop-Rite, Aldi, Your Local Food Store/Chain and Publix. We might view Trader

Joe’s as practicing a generic strategy of focused differentiation.

Then, let’s change the industry definition to say that,

Trader Joe’s operates in the brick and mortar retail organic and natural food grocery store industry in

the United States. Excluded from this industry are competitors whose grocery sales comprise less than

80% of their revenues.

Under this modified definition, the list of competitors might instead include, Hannaford, Whole Foods,

Sprouts, Sunflower Farmers Market, Your Local Organic and Natural Food Grocer or Coop, and Natural

Grocers (by Cottage Village). With just the small change in wording, we might view Trader Joe’s as a

focused low-cost competitor.

My point is, how you define the industry can affect the composition of competitors in the industry and

your view of generic strategy. The results of the other analyses you complete at the company level will

help you to determine and support a chosen future strategy.

5. Below is a grid of the analyses by level that I may ask you to complete as part of future case analysis

and which you will need to complete for your group case. You can find information about each of

these in the Case Guide with some additional notes provided from time to time in Ask the Instructor.

Begin to associate the analysis done with the level at which you would perform the analysis. This will

help you as you consider strategy formulation. For example, if I asked you how an increasing trend in

consumer borrowing might affect your company, you might consider the increasing trend first at the

industry level in an analysis of Driving Forces before offering an explanation for just your company.

Level Analysis

Industry Level:

Industry Definition

Industry Characteristics

Five Forces of Competition

Driving Forces

Segment Level:

Strategic Group Map

Minimum Success Factors for Operation in a Segment

Primary Competitor Analysis

Company Level:

Historical Financial Trends

Stakeholder Identification

Sustainability Issues Analysis

SWOT Analysis

Value Chain Overview

Identification of Competences and Distinctive Competence

VIRO Analysis and Sustainable Competitive Advantage

Overall Strategy Choice

Generic Strategy Choice

As you write your post for this week and others, be sure to include the business vocabulary you have

developed for yourself as you have completed your classes in the MBA program. You should begin to

incorporate this terminology into your writing and to make it a part of your professional communications.

Think of the answer you supply in your post as the beginning of a conversation. To invite the responses of your

fellow students, I encourage you to pose a question (supplying your own answer along with it) within your

post for this week (or any week). Many times, you will find that the case or the topic relates well to your

experience, so I encourage you, in addition, to share your professional stories as these apply, including those

from volunteer experiences or internships. Such stories can be invaluable for helping you support your

position and quite educational for those students outside your industry. Insider stories can dissect a complex

issue far better than any textbook.

Note that you should refer to the HBSP works we read as cases, not articles. You may be tempted to refer to a case as an article, but the two are not the same. Here are two very simplified definitions (according to a Cengage Learning Online Study Guide):

A case (or case study) is an account of what has happened within a business (or industry) over a

number of years. Often, a case will present a problem or scenario that requires resolution or

direction.

An article is a full text document or literary work meant to provide information, such as what one

might read in a magazine.

Happy reading!