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Innovation Somerfield - Essay Example

Retail is of the leading economies in the United Kingdom. The grocery market was worth i?? 133. 3bn for the calendar year 2007, an increase of 4. 0% on 2007 (See Appendix 1). Convenience retailing counts i?? 27, 4 bn. The objective of this work is to propose e-business plan based on innovative e-technology in order to enhance convenience offer available to the customers of Somerfield. In order to achieve the objective the author is going to use secondary method research on the business company position, current market and trends. E-business plan will be designed for the innovative e-technology product.

The work consists of Executive, Business (SWOT analysis), Operations, Financial, Marketing (7P’s analysis) and Competitor analysis ( Porters Five Forces Analysis) Somerfield is one the leaders of the convenience market. The company has 880 stores across United Kingdom. The Head Office is based in Bristol. In the year to April 2008 Somerfield generated net sales of i?? 4. 2bn, and earnings before interest, tax and depreciation of i?? 233m. At the year end net assets totalled i?? 1. 3bn (1). The customers have the trust towards the products and services of the company. Currently the company offers two formats of stores:

-Neighborhood – locations of the stores may vary i. e. city center with foot traffic -Transient- including rural stores, as well forecourts Somerfield has proven records of financial achievements which are based on a customer satisfaction. The company remains flexible and innovative-adaptable which is very important to stay competitive on the market. Existing service and products. Business overview Somerfield delivers high quality products to every customer. It produces the premium quality products as well as own label products which make possible to appeal to bigger spectre of its customers.

The company strongly maintains its convenience position on the market among other retailers. For example rotisserie, coffee station, hot food, National lottery and scratch cards, Pay point ( service which enable customers to pay for the utility bills incl water, electricity, gas), bakery, delicatessen, DVD , CDs. These convenience services give them reliable and dependable shopping experience. Somerfield is aimed to enhance the competitiveness by deploying innovative technology throughout its all stores through links with its suppliers and customers.

Somerfield aims to target the following social categories B, C1 and C2, D and E. (more information please see Appendix 1). The whole process of this technology installation will be very much customer based. A study by the department of trade and industry (DTI) called, ‘E-Commerce Impact Study: Retail Overview’ (www. dti. gov. uk 29 July 2002) showed that more than 75% of retailers are adopting e-business technologies. The Company prides itself for innovative ideas in operations which made possible for the company to stay competitive.

Home delivery is something that the company has been offering to its customers as part its compliance with its strategy. Over 300 stores are able to provide such services. It is extremely popular with their customers who rely on a public transport i. e. elderly, student, and busy professionals. It is free of charge of every purchase over i?? 25. The Customer enjoys using such service as all their shopping will be delivered “in purpose-built multi temperature vehicles which ensure that the customer receives their groceries in tiptop condition” (2).

It is very convenient for those who prefer to shop at the convenient to them time and get their groceries delivered at the prearranged time. The customer have the privilege of using the Home Delivery Card with all necessary personal details in order to avoid wasting the time at the checkout and filling the form. The company went further by offering Business Delivery to the local businesses. “This is a free service offered to local businesses where Somerfield acts as a preferred supplier it ties in the benefits of home delivery with the Somerfield business account card.

The service is popular with local businesses such as bed and breakfasts, independent hotels, care homes and councils”(2) Home Delivery is considered to be 5% of Somerfield profit margin. The author was particular interested in enhancing the convenience sector of its operations. To do so, the author propose to install a self-service home delivery station which will enable customers to select needed products and get them delivered home at the prearranged time. The author believes such e-technology will be strategically correct step to comply with Somerfield vision to become Britain’s favorite’s local grocery shop.

The company strategy The company aims to be the leading local fresh and convenience food retailer. Its retail strategy has a focus on providing customers with the freshest foods, served by friendly and helpful staff at stores in the heart of many communities (2). The Somerfield objectives * The main objective is to become Britain’s favourite local convenient shop by 2012 Financial objectives – A double digit growth rate for the first five years on home delivery service – To increase a market share from 8% to 10% within next three years

– The company aims for a return on investment of at least 15% within next 5 years – An increase of the profit margin by 10% a year after 18 months. Over past two year the company has transformed every aspect of its business in readiness to achieve its goal to “Britain’s favourite local grocery convenient shop”. The usage and installation of innovative technological equipments in stores will be a huge push factor towards the company’s convenience advantage. The programme does not simply involve using technology to existing processes but will also involve using technology to help to change these processes (3).

For the successful future of the programme the author believes that the company has a great depth of understanding and knowledge in its own processes and activities through further technological development and inbound and outbound logistics. Somerfield would need to organise all activities to support the changes on in its process. 1. The programme is the first know-how on the existing market; therefore there could be a moral barrier for some customer to try the first time the offer. 2. Some customers feel unsafe about giving their personal details to the company. This is a big no-go situation especially for elderly people.

In general, the company may suffer losses from the technological-resistant customers. That’s why, management of the company would need to conduct smart marketing campaign to promote secure transaction as well innovative and convenient offer. 3. Risk of failure. Somerfield plays a role of pioneer in this case where such e-technology has never tried in practice. Therefore, the company puts itself at the big risk. 4. Fear of unknown including ease of use- it may be just a general fear of technology. 5. Legal constraints. Please see the lists of the laws and government regulations that 6.

Somerfield would need to comply with ( Appendix 4) . 7. High cost of delivery and limited potential of the technological capi?? bilities. Market overview. Competitor analysis. Marketing plan Retail environment is variable and depends on many factors. Those could be divided into Micro and Macro influences. Micro 1. The organisation. Competitiveness of the company relies on the smoothness of different components within the organisation e. g. staff turnover, communication flows, channel of command, organisational structure and culture, management style, moral. Somerfield has forty five thousands employees.

Management of the company did fantastic job in setting the targets, achieving and keeping the friendly ambience within the staff. They managed to implement a team factor, coordinate the effort of all employees in achieving the targets. That’s why the company achieved great financial result in the year 2007. The rest of the micro factors that influence the organisation could be well described in Five Forces Analysis. 2. -Competitive rivalry. To stay competitive in retail demands incredible efforts from the company to compete on the market.

In Summerfield case, Coop is the rival number 1.it operates in the same industry, offers the same services. For example, only last year trading profit increased by 20% to over  15m and that the net assets of the Society have increased to a record 297m (4). One of the problems in this industry is the constant pressure from “BIG 4” supermarket Tesco, Asda, Sainsbury’s, Morrison’s that expanding in the convenience sector too. 3. -Power of suppliers. They play a very important role in this business. The profitability of Somerfield depends on the prices the suppliers set for the products, fuel prices, fees of PR agencies. 4. -Customers are the most important in T&T industry.

The consumers have got an underestimated influence over the decisions in this business. 5. -Threat of new entrants. It is fair to say that it is not difficult to enter the convenience. However, big players even including Somerfield and Coop have securely placed the position on the market, thus posing threat to every new entrant to the market. 6. – The threat of substitutes. It refers to the ability of the customers to switch to an alternative company (Coop, Sainsbury’s local, Tesco Express). Of course, the extent to which the customers can choose place to visit depends on the efficiency, level of service and the price.

Unfortunately, in Retail industry the following negative aspects such as an irregular service quality, largely resulting from the human activity (customer service, staff turnover) taken place. For Somerfield, the biggest threat comes from its rival Coop. Both companies are representatives of the convenience sector of Retail, both have similar strategically visions. With the implementation of such innovative technology, the company has a chance to differentiate its offers focusing on customer-relationship management to build customers’ loyalty.