Formulation of Strategy for Spar Zambia Essay Example

brand in Zambia. SPAR Zambia’s key focus is on quality and service. The aim n 2011 is to widen the range of products offered to their customers by working with SPAR RSA, SPAR UK and SPAR International in sourcing private label ranges, first launched March/April 2011. 4. 2 Strategic alliances SPAR Zambia has entered into strategic partnerships with its wholesalers, retailers and farmers. This unique partnership allows SPAR Zambia to operate locally offering customers a personal service supported by all the benefits of global business. SPAR partners are carefully selected by a panel looking at various variables of the product being offered such as:

1.Pricing

2. Quality.Does it meet the minimum required standards?

3. Capacity of the supplier to meet the demands of the corporate stores

4. Packaging. Does it meet the standards stipulated by the government of Zambia? ” Source: Interview with Dux Bhaga,

4. 3 SPAR: expansion and growth. Expansion is a key component to SPAR’s business strategy. That is why spar continues to invest in the redevelopment and expansion of their store portfolios and the SPAR chains worldwide. SPAR Zambia is planning to open 30 stores by 2015. ( source: spar-stategy2sustain. com)

4. 4 System.

The electronic system that supports stock control, pricing and supply chains of SPAR Zambia is RMS (Retail Management System). RMS was recently interfaced with the centralized Finance operations. The system offers SPAR a complete point of sale (POS) solution that can be adapted to meet unique requirements. RMS automates POS processes and store operations and provides centralized control for SPAR Zambia Corporate stores.

4. 5 Market Research In order for SPAR to maintain or increase its market share, it has to constantly carry out its

market research to find out what the customer needs are.

It has to be innovative, creative and customer orientated as it looks at its product range and its supply chain. 5. 6 Supply Chain SPAR Zambia imports 10% of its products from South Africa’s Distribution Centers. SPAR has outsourced its part of its logistics management bringing about order-to-delivery lead-time reductions and overhead reductions. SPAR has entered into partnerships with RSA transporters to deliver straight to individual SPAR shops in Zambia. The elimination of a DC in Zambia means that there are lower overheads costs and less handling of goods.

Other services that SPAR has outsources are security and cleaning services. However, one needs to be mindful of the fact that outsourcing can also generate negative externalities for the outsourcing firm. For example firms can experience diseconomies of scope in management of multiple firm activities or diseconomies of scale in producing a single activity. Source:Graves et al. Both the advantages and disadvantages of outsourcing have to be looked at before a decision to outsource is reached. 90% of products are sourced locally with suppliers delivering to individual SPAR shops.

These measures are meant to increase the purchasing power of the Zambian people and SPAR needs to re-position itself to ensure that it increases its market share.

* Economy These include interest rates, taxation changes, economic growth, inflation and exchange rates. The Zambian economy grew strongly in recent years owing to favorable external circumstances. In 2008, however, the sharp fall in copper prices adversely affected Zambia’s economic prospects and impacted on consumer expenditure. A sharp rebound in copper prices during 2010 and a large maize crop helped Zambia recover.

Zambia’s economy is

highly dependent on copper and this lack of market diversity subjects Zambia to high level of instability in the economy. Source: www. spar. co. zm Even as it plans to grow the SPAR brand in Zambia, it must periodically analyse the economic factors that might affect its expansion.

* Social These are the social trends, socio-economic groupings, value systems and ethics that affect the organsation, both sector and industry-wise. Zambia has diverse cultures and religious beliefs that affect customer tastes.

Spar tries to focus on ethical aspects such as the origin of eggs and responsible animal treatment, as well as on organic product ranges. SPAR international is committed to responsible retailing. it meets the needs of customers, provides employment for locals and a suitable market for suppliers. It is from this involvement that SPAR fulfils its corporate social responsibility  by supporting charities, communities and sports organizations., SPAR Zambia supports the Leukemia ward at the University Teaching Hospital inLusaka.

* Technological New technologies create new products and new processes. On line shopping is one technology that SPAR can consider using in Zambia. It will improve the way SPAR does business and be of great benefit to the customers.

* Legal Organizations need to keep up with legislation that affects their business. Health and Safety regulations and pollution controls put in place by the government have to be met. For example here in Zambia, SPAR must meet the health requirements and packaging standards stipulated by the government such as inclusion of expiry dates on food stuff. Environmental The number of 'SPAR green products' found in stores is increasing. Customers show their responsibility for the environment, as well as for a healthy

nutrition by purchasing these products. As part of their Corporate Social Responsibility program, SPAR has focused on the health and well being of their customers.  SWOT Analysis SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a business venture.

It involves specifying the objective of the business venture and identifying the internal and external factors that are favorable and unfavorable to achieve that objective. source: wikipedia website In its strategy formulation exercise it is important that SPAR analyses the environment in which it operates.

* Strengths A company’s strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Spar’s strengths are product freshness, quality, value and friendly customer service. These have always been the core strengths of SPAR.

* Weakness SPAR is relatively new to the Zambian market which gives its competitors an advantage because the competitors have created brand loyalty. Pricing - most of SPAR Zambia products are slightly higher than it’s closest competitor, Shoprite . SPAR needs to change its pricing policy especially regarding local basic products found in other supermarkets.

* Opportunities In a growing market like Zambia, the opportunities for growth are great. Right now SPAR shops are concentrated in the capital city, Lusaka. Most parts of Zambia only have Shoprite which sometimes do not meet all the needs of the customers creating opportunity for SPAR. Threats The main threat is the emergence of the giant supermarket Pick n Pay.

5. Porters five forces Porter’s 5 forces analysis draws upon industrial organizational economics to determine the competitive intensity and therefore attractiveness of a market. We will use this model

to analyze the competitive position of SPAR in relation to other Supermarkets operating in Zambia. Three of Porter's five forces refer to competition from external sources. The remainder are internal threats.

5. 1 Barriers to entry These barriers measure how easy or difficult it is for new entrants into new erritories, including cost advantages, government policies and taxation, access to distribution channels. The Zambia government has waived some company taxes in order to encourage foreign investment. SPAR can take advantage of the good investment policies of government to effect expansion into new areas where they do not exist.

5. 2 Threat of substitutes SPAR management have to constantly check on the performance of their products against available competing products, price and performance of substitutes, buyer switching costs, perceived level of product differentiation.

5. 3 Bargaining power of customers With a number of new entrants into the supermarket market business, this means that SPAR customers have greater choices than they had before and can easily switch brands. The threat comes from the fact that in this industry customers are price sensitive and there are many substitutes on the market. For example, one can easily substitute a SPAR private label with a Shoprite brand..

5. 4 Bargaining power of suppliers The bargaining power of suppliers is also described as market of inputs. For most products, SPAR has a good number of suppliers who are willing to deliver to the stores.

However, the threat might be high prices being charged by some suppliers of exotic products.

5. 5 Rivalry among the existing players SPAR management realize that the food and grocery industry is growing and becoming more competitive. Shoprite and Pick n Pay are

carrying out weekly promotion activities and quickly increasing number of outlets so that they can woo more customers. SPAR has to step up its expansion and growth strategy if it has to compete and avoid being outperformed.

6. Review of SPAR’s customer requirements Order winners are factors that directly and significantly help products to win orders in the market place.

Order qualifiers are factors that are regarded by the market as an ‘entry ticket’.

6. 1 Order qualifiers The following are the order winners for SPAR Zambia:

a. Freshness of the food. For example the vegetables, meats and confectionary are always fresh.

b. Customer- orientated products. This includes sandwiches, ready- made favorite local dishes. SPAR products appeal to diverse modern day lifestyles of customers.

c. Quality of goods. SPAR tries to promote their service and quality at fair prices that may not necessarily be the cheapest but customers get value for money. .

Order winners

a. Essential to meeting the convenience needs of their customers, SPAR Store opens for long hours, from 07:30 hours to 22:00 hours. This has helped SPAR to secure competitive advantage as most shops close early in Zambia.

b. Innovative product ranges. SPAR has widened its product range offered to customers by working with SPAR RSA, SPAR UK and SPAR International in sourcing private label ranges.

7. Performance review of SPAR Zambia’s competitor supply chains SPAR’s main competitor in Zambia, Shoprite Checkers.

7 . 1 Shoprite background and operations. Shoprite group opened their first shop in Lusaka Zambia in 1995. Currently Shoprite group has 18 retail stores, one wholesale and 7 fast foods outlets trading as Hungry Lion. Shoprite employs about 1698 people. The bulk of the operations are in urban areas

with a handful in rural areas mainly the provincial centres.

7. 2 Shoprite weaknesses

7. 2. 1. Shoprite Zambia does not seem to value its workforce as evidenced by the low salaries which have led to a number of strikes and government intervention. As a result customer service is poor in most Shoprite stores.

7. 2. 2 Commitment to developing local industries and products is low.The percentage of its imports is higher as compared to SPAR.

7. 3 Shoprite Supply Chain Shoprite Zambia consolidates the purchases for all its shops and ensures that its suppliers have the capacity to meet demands of the shops.

7. 4 Corporate Social Responsibility (CSR) Shoprite involvement with community is limited. Shoprite runs a consumer programme on the national radio station. It has occasionally supported some national sporting activities and provides information boards in all its supermarkets as part of its CSR. Source: htt://www. amsco. org

7. 5 Competing for market share

Shoprite pricing strategy of giving its customers the lowest prices on basic foods, has given it competitive advantage and currently enjoys a good market share in Zambia. Shoprite has been in Zambia longer and brand loyalty has been established in some customers. SPAR can look at these strengths and put in place strategies that can convince customers to switch brands. A quick win for SPAR would be to quickly open up outlets in other cities of Zambia.

7. 6 Outsourcing Shoprite Zambia has a policy on outsourcing and subcontracting. Management listed outsourced and subcontracted services as security, merchandising and cleaning.