Strategic Management

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Bargaining Power of Suppliers – TJ developed long term relationship with the suppliers, enabled prompt payment and in return got private label products from them at low cost. The company worked with the suppliers closely in order to delivery unique products to its customer base.

Bargaining Power of Buyers – In order to handle the high bargaining power, TJ created 80% of private labels which were not available elsewhere, therefore, created significant switching cost. Further, since the private labels were available only in TJ, the buyers were buying in bulk as well. TJ carefully selected the customer base of intelligent people who wants to try out new things, in return introduced 10-15 items per week.

Rivalry of Competitors – TJ created its own niche in terms of what the company sells, to whom the company sells and how the company sells, there was no one comparable to TJ at the time the case was written. Further, TJ did this at a low cost which itself is a big differentiator.

Threat of New Entrants – TJ enabled barrier to entry by creating the brand which was known for unique products, organic & healthy products, it became so popular that users started creating social pages in order to attract the company at various locations. Further the private label brands could be easily copied or imitated. Also the existing physical locations were also valuable resource and a barrier to entry to new entrants.

Threat of Substitutes – The Company kept its customer base engaged through marketing of fearless flyers.

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TJ may lose its competitive edge by losing any one or many resources that it created over the time. The brand may get diluted if the product quality becomes inferior or a better quality product is introduced in the market at lower cost. The big players like Walmart may do some kind of exclusive deals with suppliers restricting them to supply to us. The lease agreements of the key locations may get expired and may not be able to renew. A sudden change in customer behavior or pattern or food habits may change that may lead to reduction in TJ business. A major competitor may hire TJ’s trained employees at higher salaries leading to a vacuum for TJ.

Defending TJ’s position as a niche player is critical as this will enable the company to continue generating revenue, its value proposition. It could consider following strategy moving forward:

- Innovation: The Company need to spend money on innovation, this may include the existing product innovation but also IT investments in order to track every customer through face recognition, artificial intelligence to track their buying behavior patterns etc.

- Entry to Social Media: The Company should leverage from the world of social media and should use it as part of the marketing strategy.

- Brand Loyalty: Reducing the threat of substitute by introducing brand loyalty concept, thereby, launching promotion specific to these customer base.

- New Value Proposition: Find a new angle for customer value that is unique and further differentiate the proposition like unique bakery products or ready to cook meals etc.

- Exclusive Products: The company may also consider doing a tie up with either existing companies or new startups to utilize the infrastructure to test the market.

- Geographical Expansion: The Company may expand in developed cities in Canada & Europe, leveraging the current capabilities and brand..

Annexure 1 – Trader Joe’s Strategic Choices (Business Model)

What?

Who?

How?

- National chain of neighborhood grocery stores, selling natural & organic food at lower prices.

- 10-15 new products every week, not to follow trend, eliminate similar number of products as well.

- 4000 SKUs in average 15K Sq. Ft. store out of which 80% were unique, being private label.

- Intelligent, educated, and inquisitive individuals.

- Individuals who are health conscious, enjoy travel and likes to try new things.

- Small stores of 10K Sq. Ft.

- Strong company culture, employees take ownership, every employee is respected equally.

- Good wages to employees with 15.4% contribution to retirement accounts, healthcare benefits to part timers as well, 10% discount on purchases.

- Different look & feel with South Seas theme, employee outfitted with Hawaiian shirts, Manager to be known as “Captain” with assistant as “First Mate”

- Marketing through customer newsletter known as “Fearless Flyer” with someone radio ads.

- “Everyday low pricing” philosophy.

- Avoid trade shows in order not to feature products.

- No charge to suppliers to slot their products on the shelves, paid suppliers promptly and kept secrecy about the relationship.

Annexure 2: Resource & Capabilities – VRI Framework

- Employees – The employees of the company were paid well above the market, were offered health insurance, were offered 10% discount on purchase, were offered expense account in order to try the new products. The employees loved working at TJ and stayed for years, all were taking the ownership and understands how the business is run. Further, each employee was trained as generalist and not specialist.

- Private Labels & Relationship with Suppliers – Over the time, the company built its relationship the suppliers and introduced private labels which couldn’t be imitated easily, thereby creating barrier to entry.

- Key Locations – The existing physical locations of the store, the lease agreements for these were also valuable resource as these cannot be replicated easily.

- Brand / Reputation – The brand name “TJ” became popular over the time and in 2012 it was named as second best supermarket in the country, this is great resource.

- Customer Base – The Company has hug customer base which they can utilize with the help of software and artificial intelligence in order to increase the sales.