Fsa Midterm Ratio
Midterm Report: Kroger vs Safeway
Industry and Company Background Kroger is the largest grocery store chain in the United States with 2424 supermarkets located in 31 states. It focuses on high quality products and has a wide range of selection. Each supermarket carries almost 50,000 items to satisfy its ever growing diversified customer base. Safeway is the second largest superstore chain in the country. It operates 1641 stores across western and central region of North America. Safeway emphasizes customer shopping experience and superior customer service. Both companies are in the retail industry and compete heavily across several states in the country. In addition to competing with a number of other grocery chains, Wal-Mart is identified as a major competitor for both firms. (Exhibit 1-1) Besides competition, Kroger and Safeway are concerned with key macroeconomic and internal factors. GDP is highly correlated with sales in the retail industry hence personal disposable income is the most critical macroeconomic factor for retail firms’ operating performance. When individuals have more disposable income, they spend more money in the retail industry. As for internal factors, critical success factors for both Safeway and Kroger include focusing on profitability via cost control and focusing on value creation due to the competitiveness of the industry, customer’s budget concerns, and low switching cost. Kroger is able to offer competitive costs for its private label products by backwards integrating and manufacturing 40% of its corporate brand product. Additionally, Kroger is aiming to reduce the costs of energy by pursuing green initiatives. This program includes the installation of wind turbines for the Turkey Hill Dairy that has allowed Kroger to save over 25% on its electricity bill over the last two years. (Smith and Sweet, 2013) As a result, the energy saving initiative adds up to cost savings of $160 million a year on electricity alone. Safeway, on the other
Industry and Company Background Kroger is the largest grocery store chain in the United States with 2424 supermarkets located in 31 states. It focuses on high quality products and has a wide range of selection. Each supermarket carries almost 50,000 items to satisfy its ever growing diversified customer base. Safeway is the second largest superstore chain in the country. It operates 1641 stores across western and central region of North America. Safeway emphasizes customer shopping experience and superior customer service. Both companies are in the retail industry and compete heavily across several states in the country. In addition to competing with a number of other grocery chains, Wal-Mart is identified as a major competitor for both firms. (Exhibit 1-1) Besides competition, Kroger and Safeway are concerned with key macroeconomic and internal factors. GDP is highly correlated with sales in the retail industry hence personal disposable income is the most critical macroeconomic factor for retail firms’ operating performance. When individuals have more disposable income, they spend more money in the retail industry. As for internal factors, critical success factors for both Safeway and Kroger include focusing on profitability via cost control and focusing on value creation due to the competitiveness of the industry, customer’s budget concerns, and low switching cost. Kroger is able to offer competitive costs for its private label products by backwards integrating and manufacturing 40% of its corporate brand product. Additionally, Kroger is aiming to reduce the costs of energy by pursuing green initiatives. This program includes the installation of wind turbines for the Turkey Hill Dairy that has allowed Kroger to save over 25% on its electricity bill over the last two years. (Smith and Sweet, 2013) As a result, the energy saving initiative adds up to cost savings of $160 million a year on electricity alone. Safeway, on the other