Kroger Swot Analysis

Strategic Marketing

SWOT Analysis of Kroger Co.

Marcus A. Bradley

Columbia Southern University

Abstract

Kroger Co. as with most of its competition finds itself in a unique and challenging position to maintain market dominance while suffering the effects of a sluggish economy. While having an impressive market share in 44 markets and 31 states, the weaknesses of operating manufacturing widespread operations, open it up to contamination risk and pricing problems from within the organization that must be accounted for either at the supply or demand side. Kroger’s expansion into the finance market proved valuable in 2007 and an the opportunity to expound that success is at the
forefront of Kroger’s opportunities, however Kroger is at the mercy of the economy which has been particularly hard on agriculture and discretionary spending which creates a potential branding crisis among their high-selling house brands.

Kroger is an American retailer headquartered in Cincinnati, Ohio with over 90 billion in sales year over year.
It is the country’s largest grocery store chain and second only to Walmart as the nation’s leading retailer. Either directly or indirectly through its subsidiaries, Kroger reported operating 3574 stores as of 2010 and maintains markets in 31 states. Kroger is notoriously unionized and has a mission and strategy that is focused on providing quality products among all of its subsidiaries and marketplaces which are economically practical and providing superior customer service to its respective consumer base. Over time, Kroger has reached its growth maturity, and now competes directly with Walmart in many of its markets. Currently Kroger’s growth opportunities are through methods such as acquisition of other popular competitors. This opportunity is currently being leveraged by Kroger in the recent acquisition of 212 stores in North Carolina of the ‘Harris-Teeter’ chain (Kroger,
2013)

Strengths: Kroger today is one of the largest retailers in America with over $90 billion in sales annually since 09 (Kroger, 2012). Kroger operates several subsidiaries under its operational reach, such as Fred Meyer and Kroger Personal Finance. Kroger itself consists of roughly 2500 super markets and employs over 323’000 employees. A major strength of Kroger is the sheer size of its market; 44 markets in 31 states. Geographical diversity across the entirety of the organization makes capitalizing on its organizational strengths a more effective process. Kroger became an industry pioneer in many of the technologies in today’s modern supermakets, including self-scanning terminals, consumer cards and RFID. The company is one of the few companies of its size that can compete with Wal-Mart in its grocery market across the areas in which it operates alongside the retail giant. The company’s brand equity is a major point of competitiveness: Kroger was listed 82nd in the Global 500 Brand Ranking (Ranking the Brands.com) and the Reputation Institutes regards Kroger among the top 20 most reputable companies. Advantages like this help Kroger endure its recent string of negative earnings forcasts. Kroger employs a three-pronged branding approach that consists of private selection, banner brands and Kroger Value. Private selection represents Kroger’s upscale brands while ‘Kroger value’ delivers quality items at more liberal prices. Kroger’s banner brands consist of its subsidiary brand items which use the company’s private labels (Ralph’s, King Soopers ect.).

Weakness: Kroger Co experiences growing pains inherent to any major organization which operates with comparable width. As a competitor in 44 markets, Kroger operates with hundreds of suppliers, all which are subject to fluctuations in the price of their goods and services for reasons outside of Kroger’s control. Furthermore, working in the food industry puts a strain on supply chains which bend them to the perishability of the cargo. Kroger’s supply chain is technologically inferior to more streamlined supply chains like that used by Walmart. The sheer size of the supply chain also creates a threat of contamination; a serious case of which could not only hurt the consumer but the company’s brand and profits. The size of Kroger’s operations has also lead to lapses in quality control over the company’s long history which erode the company’s brand loyalty. Kroger’s unionized workforce puts it at a competitive disadvantage compared to stores in its industry who enjoy lower labor costs which find their ways to consumers.

Opportunities: Founded in 2007, Kroger Personal Finance, LLC provides personal products and services related to finance and checking/debit functions. Itself a joint venture between Kroger Co. and U.S. Bank, Kroger’s decision to penetrate this market proved fruitful to the company as whole. Kroger’s ability to capitalize on this new venture into a thriving market is at the mercy of the economy, and thus is ripe for capitalization as the recovery endures. More immediate opportunities in the current economy are easier to leverage: most notably, it’s three pronged merchandising strategy. Kroger’s push of its own product line of products which include more than 14’000 brands would continue to increase Kroger’s profit margin and relieve the company of dependence on outside brands in stride. During the 4th quarter of 2009, Kroger’s private label brands accounted for 27% of their entire grocery sales (Kroger, 2010). Around the same timeframe, Kroger announced an aggressive growth strategy. Clever districting would allow Kroger to provide their services to a wide array of markets in which Kroger brand loyalty is already at its peak.

Threats: Kroger being a unionized company, it yields itself to the rising costs of labor.
This comes through changes in the regulatory structure, the periodic shift in public opinion on the matter of minimum wage laws, and the inflation of economy in general. Union negotiations, while appearing to benefit employees, can widen the profit margins for the company which equate to higher costs for consumers and inherently lower sales. A sluggish economy presents one of the largest threats that Kroger and its competitors face, and it demands the constant attention and adjustment of sales analysts. Due to the size of Kroger’s operations, the organization must track the effects of the economy on a wide range of operational strands; the majority of which are beyond Kroger’s control. None of these industries are more troubling than that of the agricultural industry due to it being the fulcrum of Kroger’s competitive strategy (unlike more eclectic industry competitors like Walmart). Kroger stands to lose profit margins with its higher end prong of its three-pronged Branding Approach as spending on luxury brands tapers off with as a side effect of economic
times.

References:

Annual Report For the fiscal year ended January 28, 2012 - THE KROGER CO.". UNITED STATES SECURITIES AND EXCHANGE COMMISSION. Retrieved 2013-07-02.