The case of Premier Foods and the 'pay to stay' payments that they were extracting from their suppliers gives an opportunity to use the Porter's Five Forces model to analyse the food manufacturing industry in the UK. Last week, BBC's Newsnight carried a report about Premier Foods, who manufacture many key brands including Ambrosia, Mr Kipling, Oxo and Bisto.
The online report comes with a 5-minute video clip which sets up the topic nicely. Newsnight's Laura Kuenssberg interviews engineer Bob Horsely, who had a contract to supply maintenance services to Ambrosia's factory in Devon. He received a letter from Premier Foods saying that "We are aiming to work with a smaller number of strategic suppliers in the future that can better support and invest in our growth ideas. We will now require you to make an investment payment to support our growth." When he queried this, he received another letter: "We are looking to obtain an investment payment from our entire supply base and unfortunately those who do not participate will be nominated for de-list." In other words, pay up or we won't buy from you any more.read more...»
There must have been a siege mentality at Tesco recently, as they are locked in hand-to-hand battle with Asda and Sainsbury, and find that they are outflanked by Aldi and Lidl. Whether that justifies some of the tactics being employed to regain the upper hand, or the financial relationships they have had with suppliers for the last few years, is being investigated by the Serious Fraud Office, and is increasingly coming under public scrutiny. What could be the worst outcome for them: a serious fine which erodes their already-battered budgets, a change in accounting practices forced on them by the outcome of the SFO investigation, a real shift in the supplier/buyer power relationship that has so far seen Tesco, the buyer, with huge advantage, or a significant change in public trust and their relationship with their customers?read more...»
If a business sees a market segment in which sales are predicted to double to the scale of 15% of the total market in the next five years, you would expect them to be quick to find ways to enter it. However, if you are Sainsbury's, and have a carefully nurtured image and market position to protect, you might baulk at rushing into the discount segment of the market, in case it interfered with that image or cannibalised your market.read more...»
BBC Radio 4 has a 5-part series this week which follows eight budding entrepreneurs on a course in Leeds, specialising in how to run their very own Fish and Chip shop. I caught the first episode yesterday; with each episode only 15 minutes long, it seems like a very good set of programmes for students who are beginning a Business studies course, as it covers a wide range of the issues that they will be learning about.read more...»
Tesco's share price slid again today, although the firm has announced that the new Finance Director Alan Stewart started work three months earlier than expected.read more...»
News about Tesco's troubles comes thick and fast, today's bad news about overstating profits has wiped off 11.59% of the share price. It fell by 26 pence to £2.03.read more...»
If you are looking for a good recent example of how takeovers can destroy returns for shareholders (of the investing business), then add Morrison’s purchase of Kiddicare to the list!read more...»
This will be a dynamic business story that will be essential for business students to follow closely over the coming months. Tesco has announced the appointment of Dave Lewis to replace Philip Clarke as CEO with effect from 1 October 2014.
This decision is significant for many reasons, not the least that Dave Lewis has never been a retailer, nor has he ever been a CEO. Nevertheless, Lewis was the man that Tesco wanted (he was headhunted) and he has a superb track record at Unilever, one of the world’s leading multinationals in the FMCG sector (“fast-moving consumer goods”).read more...»
Some news in the same week as Philip Clarke's high profile departure from Tesco, is that Karl Albrecht, who founded German discount supermarket chain Aldi with his brother Theo, has died. The success and growth of Aldi (an abbreviation of Albrecht discount) is one of the thorns in the side of Tesco, and one reason for the profits warning that they announced yesterday, along with several other problems that Clarke inherited when he took over from Sir Terry Leahy three years ago. There is plenty to analyse in the criticism of Tesco's strategy, but also worth considering what it is that has enabled Aldi to break into the market, and how they have moved to a position of having 19% of those in the AB socio-economic catergory shopping in their stores.read more...»
How on earth is Starbucks making a success of its push into China? China is a tea-drinking nation. In fact, China has the world's oldest and largest tea-drinking culture. Chinese people hate coffee – they say it tastes so bitter it is like tasting medicine.
But, look at the evidence. Starbucks has been in China for 13 years, with an initial presence in the major tier 1 cities Beijing, Shanghai and Guangzhou. Starbucks expects China to become its second-largest market by 2014 aiming to have 1,500 outlets throughout China by 2015. The number of staff employed by Starbucks in China is forecast to rise from 12,000 to 30,000.
According to the latest Euromonitor report, Starbucks has a 60 per cent share of China's emerging coffee house market, well above its closest competitor.
That sounds like a success story. So how has it done it?read more...»
It's official - women are better at shopping than men. I have just finished listening to a brilliant edition of Peter Day's 'In Business' called Price Conscious, and one of the revelations was that men can be fooled into thinking they are getting a bargain simply by using red price stickers, whereas women are much more analytical about pricing and can look beyond the colour used on a label. Far be it from me to comment on this any further.....read more...»
How can it be that the announcement from Morrisons today that they have made a £176m pre-tax loss for the year to February 2, has caused Tesco's share value to fall to its lowest level in almost a decade?
There are a couple of articles here which give students a good opportunity to analyse the internal and external influences which are forcing Morrisons to change their strategy, and the effect of that change on their competitors. As this article in the Daily Telegraph explains, the problem for Tesco, and for Sainsbury as well, is in the change of strategy that Chief Executive Dalton Philips announced in order to try to turn this around. Morrisons intend to cut their costs aggressively, by £1bn, and to use those savings to cut their prices.read more...»
I'd love to see the investment appraisal calculations on this investment project by Marks and Spencer. The Independent reports that M&S has invested around £150m as it relaunches its new website as part of a broader £1bn project to improve its logistics.read more...»
I'm rather bitter that Eric Cantona one of Manchester United's best former players has been banned by The Advertising Standards Agency today.
Watch the clip and try to work out why this has happened.read more...»
It has arrived there somewhat later than its major competitors. However, McDonald's has finally open its first outlet in Vietnam. It is a significant moment for an icon of globalisation, not the least given the historical connection between the USA and Vietnam.read more...»
OUP is one of the country's major academic book publishers, and naturally enough it has commissioned and published new studies on the outbreak of the First World War. A new book 'Saving the City', by Richard Roberts, covers the financial crisis which broke out in Britain, after the assassination of Archduke Franz Ferdinand in 1914.read more...»
You have a global brand. But, to maximise its strength in global markets, you need to take account of the local customer needs and wants. That is the essence of the concept of "localisation" and few global brands take this approach more seriously than Starbucks.read more...»
Retailing is a dynamic market, and firms which have been slow to adapt to changing technologies, falling real incomes, and different patterns of consumer behaviour have been losers rather than winners.read more...»
Here's a great Guardian article to bring you up-to-date: Seasonal trading news from Britain's biggest retailers have underlined the many radical changes that are taking place in the way we shop and buy.read more...»
The operations statistics look so impressive for parcel delivery firm Yodel which delivers parcels for a host of major online retailers including Amazon, Argos, Boots and Tesco Direct.
Yodel handled over 14 million parcels in the run-up to Christmas 2013, sorting over 860,000 parcels on its busiest day. It moved to seven day a week deliveries throughout December 2013 and operated an additional 13 sites to add capacity. It delivered over 52,000 bouquets of flowers on 23 and 24 December alone.
Yodel's Chairman has been quoted as saying:
"Feedback from our clients has been extremely positive and we are delighted that our partnership approach has worked so well".
So, what went wrong with Yodel's customer service last Christmas?read more...»
This interactive resource encourages students to map the position of the UK’s leading supermarket operators against two dimensions. This is a process called “market mapping”.read more...»
I suspect this example might find itself appearing in more than a few BUSS4 essays on China in summer 2014 - and why not?
Wal-Mart's business in China has been hit by a quality problem that has echoes of the UK horse meat scandal.
It is reported that Wal-Mart has recalled a "five-spice donkey" meat product in China after tests showed that it contained DNA of other animals - namely fox meat.read more...»
Wal-Mart - the world's biggest retailer - has struggled to establish itself in China. However, the world's second-largest economy must still remain an attractive and strategically important opportunity for Wal-Mart, particularly given its need to find better growth and returns to offset maturing performance in the US.
This FT article (and accompanying video below) describes how Wal-Mart is is refocusing its growth strategy in China by using its Sam's Club chain to target affluent Chinese consumers in the main Tier 1 and Tier 2 cities.read more...»
A terrific example here of how a return to core, basic retailing skills has enabled fashion retailer Bonmarche to turn around its performance and future.read more...»
A perfectly-timed publicity stunt by e-commerce giant Amazon certainly had the media fooled last week. News outlets all fell for the story - first mentioned by Amazon CEO and Founder Jeff Bezos - that Amazon was testing the use of unmanned drones to carry out doorstep delivery services. The service - appropriately named Amazon Prime Air (Amazon Prime is the real service they wanted to promote) - was featured in the video below.
What are the potential downsides of allowing drones to make deliveries? Perhaps having hundreds of thousands of them in the air at the same time? And what if Amazon's drones accidentally come into contact with an alternative delivery service - OWLS from Waterstones?
Still - a great example of effective seasonal PRread more...»
One year on from the horse meat scandal, what has changed in the UK food industry to eliminate the problems exposed by the scandal?
The horse meat scandal highlighted the complexity and length of the UK food chain. Some supermarkets have responded by promising to source from closer to home. Others have introduced new supply chain controls.
But can we now trust what is in our food? And how important is it to us as consumers?read more...»
I came across a great infographic that you will like if you're interested in marketing. Special cross-over appeal to those of you with 2D Design skills or aptitude.read more...»
It's here! The John Lewis Christmas Advert for 2013. Simple, Stunning.
What do you think?read more...»
The online clothing business ASOS started life as “As Seen on Screen” in 2000. Its target audience was “twenty something” women who loved shopping and whose tastes moved between vintage, luxury and second hand items rather than being fixed. Their customers were - and still are - very interested in keeping up with fashion trends particularly those items they see being worn by the rich and famous in the media. From the outset, ASOS provided reproductions of these clothes, having them produced rapidly and at affordable prices.read more...»
"The 20th Century was about dozens of markets of millions of consumers. The 21st Century is about millions of markets of dozens of consumers."
So said Joe Kraus, founder of a search engine called Excite in the middle of the 1990s. Never heard of it? That's not surprising; in 1999 it was a $6.7bn enterprise with hundreds of employees, but a year later the dot-com bubble burst and it disappeared from the market place. But this quote is one of in an article about Peter Day's Radio 4 Archive programme to be broadcast tonight, and already recommended by Michael Owen in his blog below; forgive me for this repetition, but this is such a brilliant article that it really merits a second look, and hopefully between us we will convince you of that!read more...»
During our CPD briefing days on China we've often mentioned the rapid growth of the Chinese middle class and the resulting impact on demand for consumer goods. China now accounts for 20% of global demand for luxury goods and this is illustrated in the following short video from the excellent FT team based in Hong Kong.read more...»
Poundland, the fast-growing discount retailer where everything is for sale at £1, looks like it might float its shares on the stock market in the near future.
Poundland is currently 75% owned by venture capital firm Warberg Pincus with the remaining shares split between over 100 Poundland management and employees. The latest income statement published by Poundland makes for impressive reading.read more...»
Just why have so many Western retail giants struggled to succeed in China? If global retailers like Walmart, Tesco, Carrefour and Best Buy have struggled, what hope is there for the rest?read more...»
This looks like a must-watch and must-record series from Robert Peston. Robert's new three-part series takes us behind the scenes of some of Britain's most successful retailers and also explores their history, heritage and organisational culture. Robert Peston Goes Shopping is on at 9 p.m. on Monday nights starting 2 September. Fantasticread more...»
An excellent case study here in how to grow a business through expansion into faster-growing international markets.read more...»
Imagine the scene. You've left what looks like your most promising Christmas present to open last. The package indicates something tablet-sized & the box feels pretty sturdy. You asked Santa for a tablet computer - so this looks promising....read more...»
John Lewis are opening a store at Heathrow terminal 2, which will be the Partnership's smallest store, the first away from town and city centres and an important step in their international strategy. For a while I’ve been looking at the idea of place in the John Lewis marketing mix, and the business has clearly identified deeper trends in retail location.read more...»
From the employer's point of view, a zero hours contract is a great example of the benefits of the flexible labour market. They allow the employer to change the number of hours an employee works each week, with more shifts offered when they are busy, and fewer when they are not; costs can therefore be controlled and matched more exactly to revenue. They are particularly popular with the fast food outlets like McDonalds and Subway, and high street chains like Boots and Sports Direct. Those employers draw heavily on the younger end of the labour market, with many of their staff being students who are looking for flexible shifts that work around their study hours; for them a zero hours contract may work well. However it is also important to consider whether this will have a detrimental effect on the business's culture; with a high proportion of staff working irregular hours it may become much more difficult to instil a culture and sense of identity with the organisation.
One of the strengths and a key component in the Co-Op Bank's USP after recent banking problems - sub-prime lending, collapse of Northern Rock and LIBOR rate fixing, was its emphasis of ethical banking.
I've become increasingly convinced from recent discussions with major accountancy firms and other major employers that workplace learning is going to challenge the preeminence of universities and colleges when it comes to obtaining higher level qualifications. The emergence of some industrial-strength Higher Apprenticeship programmes recently is a sign of that. And so to is the news that John Lewis Partnership is to extend its programme of workplace learning to offer Level 6 (university degree level) qualifications for some of its management.
This story would provide the basis for some excellent analysis by students exploring how and why John Lewis Partnership has decided to extend its internal training programmes.
Some clues can be found in extracts from the JLP press release: for example;
The so-called "University of John Lewis" will also offer a number of other development initiatives through its ‘skills programme’, which will include training in product knowledge, line management and leadership. read more...»
"Our partners give us our competitive edge, and if we want them to stay with us for the long term, we need to make sure that they have the right skills to meet the challenges we face in an evolving retail environment."
The horrific Bangladesh factory disaster has highlighted a number of business issues and proved a stark reminder of the global effects our purchasing decisions may or may not have on people halfway around the world. Tom White has already put up a blog with some initial thoughts; I thought I’d pose some further questions and examine some of the issues raised in that post.
A great starting point would be to listen to the ever-reliable Business Daily, from the BBC World Service. Their programme In the Balance invites guests to debate a topical business issue, and this week, the Rana Plaza disaster was under discussion.
One of the first questions to ask is to examine the extent to which firms which are supplied by such factories are responsible. There were more immediate causes, of course, such as the owner’s actions and the culpability of local regulation and enforcement (or lack of). But this is not the first time there have been such disasters, nor are the poor conditions in such factories surprising. So is it right that chains such as Primark continue to use such suppliers? Isn’t it their fault, with their demands for low prices and increased flexibility to meet the needs of the fast fashion market? Do they have a responsibility to ensure fair and safe working practices in factories they don’t own and which they are merely customers of? A lot of people would argue that yes, they do. But isn’t that the same as arguing we as consumers should audit the supply chains of the shops which we buy from? Primark is as much a customer as we are.
How & Why. These are the two important words for students preparing for BUSS4 and as they practice their essay technique.
So, why is that? And how can they be used?
The source of their importance lies in the skill of analysis…read more...»
Expect lots of coverage this week about the growth strategy being pursued by Whitbread plc.
Whitbread used to have a pretty diverse product portfolio including the brewing of beer and the operation of David Lloyd health clubs. However, in recent years Whitbread had rationalised its portfolio of businesses to focus on two markets where it believes it can achieve sustainable and high sales and profit growth. And it has backed that strategic focus with heavy investment. If only other UK firms would do that!read more...»
‘Feel free to browse’ often strikes me as an odd sign in many shop windows. Why wouldn’t I feel free to do so? Well, the answer should have struck me by now. Apparently, many ‘bricks and mortar’ retailers are feeling the pressure from ‘showrooming’ – when people see something they wanted in a shop, try it, check the price online on their smartphone, find it’s cheaper, and walk out.
I’ve just been reading about the phenomenon and was reminded of the sign I’ve used to illustrate this blog, which appeared in a shop window after the British camera chain went into administration. "The staff at Jessops would like to thank you for shopping with Amazon". (I think any discussion of tax avoidance can be saved for another occasion).read more...»
A superb article here from Reuters which examines the challenges facing Ikea as it accelerates its expansion into key emerging markets, notably China and India.
On the one hand, Ikea aims to exploit its global brand by applying the core retailing concept (epitomized by the store racetrack layout, flatpack goods etc) and core values that have enabled to it to become the world's largest furniture retailer.
However, Ikea also needs to be sensitive to the specific customer needs and wants in each national market if it is to meet customer expectations and compete effectively.read more...»
The organisational structure and organisational culture at John Lewis Partnership, based around employee ownership, is distinctive and highly successful. But why? What is it about the "partnership" model at JLP which drives sales and customer service so high?
In these JLP videos, the partners themselves explain their perspectives on the business benefits of partnership in a highly competitive retail environment. The business benefits of the model are examined in more detail in the second video.
Some fantastic insights into culture here as well as the motivational impact of employee ownership.read more...»
A great video to share here with your students and pose the question - can a fast food chain based on healthy eating succeed?
Students at tutor2u's EntrepreneurLIVE 2012 events met Vincent McKevitt, the entrepreneur behind Tossed, a healthy-eating fast food chain based in London.
It looks like Vincent might soon be facing some competition from an ambitious Canadian startup Freshii which is also testing the idea that fast food can be healthy by building a chain of healthy fast-food restaurants in the U.S. and around the world.
Can the concept work? Why not? But what will it take to encourage more of us to switch from the instant satisfaction of a burger or fried chicken.
And can businesses like Freshii and Tossed compete with established multinational fast food giants like McDonalds and Subway who may simply alter their product offering if significant numbers of customers decide to start looking for a healthy-eating alternative?read more...»
Terrific insights here from Andy Street, the CEO of John Lewis Partnership, about how the concept of trust is so important in business success. Some short, sharp points here which help identify elements of the organisational culture at John Lewis Partnership and perhaps point to some of the reasons why JLP has been so successful in recent years despite the economic downturn. Essentially Andy Street sees trust as a source of competitive advantage. But it is hard won, and easily lost! Businesses - take note!read more...»
The effect of the economic downturn on small retailers, and how they are adapting, is explored in the powerful video below from the FT.
First up is a bespoke tailor trying to survive in a poor area that has been significantly affected by government spending cuts to welfare payments.
In the same location is a retailer of sporting goods. His business has changed dramatically in recent years, with demand much less predictable. Cash flow management has become much harder, so he has responded by cutting stocks and repositioning his retail product range. Can he survive against the likes of Sports Direct?
Finally, we see the effect on a furniture retailer of the emergence of pawnbrokers and other loan shops.
For these retailers, costs are rising but sales are falling. The future for these high street retailers looks bleak. Can they survive? And if so, how?read more...»
Bigger is better, or so it seemed to the UK supermarkets over the last 20 years. Size seemed to offer all kinds of advantages (or ‘economies of scale’ in business terms). Many of those economies are still very present for the larger chains (especially with purchasing and technical benefits), but I’ve been reading that this mood is shifting. Since the early 90s, the UK's £160bn a year grocery business has understood that one of the key routes to success has been the ability to open more and bigger shops.
Now it seems as though the major players have come round to thinking that size is not necessarily what matters, because shoppers are changing their habits fast. Has the “space race” run its course?read more...»