Set out your overall strategy for SmartMart,
explaining why you elected to follow this strategy, and how each decision you
made contributed to this strategy.
SmartMart has been able to maintain
its competitive advantage by 1) offering high quality products, 2) having strong
customer service and expertise to help consumers make the right decisions, 3) find
the right product mix for its consumers with its technology (sales tracking
system), and 4) are able to keep labour costs below industry standard. However,
its core differentiator (organic products) is being diluted by low-cost
competitors such as Big-Box Mart and new niche CSA grocers.
When considering the overall strategy
for SmartMart, there are a few emerging trends that SmartMart must evaluate in
order to remain sustainable and viable in the long run:
SmartMart needs to make a change in
order to continue being sustainable in the long run and compete with emerging
trends. Therefore, given SmartMart’s strong relationships with its suppliers,
employees, customers, while also considering the financial and environmental
impact of trying to compete with Superstores, the most viable strategic move
for SmartMart would be to compete more closely with CSAs.
As mentioned by the Industry Analyst
in the simulation, there is no clear answer on where the grocery market is headed,
and an attempt to compete with Superstores may have a negative downstream
environmental impact that contradicts the company mission to be environmentally
friendly. At the same time, there are patterns in consumer behaviour to
indicate that there is growing concern for grocers to be more environmentally
conscious and offer more locally grown products. According to the Consumer
Report, 82% percent of consumers indicated that they would like to see
SmartMart offer more locally grown produce. Customers who want local and
organic produce are switching to CSAs in increasing numbers and SmartMart must
remain competitive not to lose their consumer base to local CSAs.
Majority of the complaints with CSAs
tend to be centred around the limited product availability due to seasonality;
SmartMart’s technology capabilities to have the right product mix will address
this concern and prevent any possibility of having too few/limited products.
SmartMart will be able to maintain a similar size store and increase the number
of SKU’s from 15,000 to 25,000 and have greater variability.
The second part of the strategy is to
engage local government agencies and FDAs to secure federally regulated labels
for organic products to ensure profit seeking companies, such as Superstores,
are not dropping their standards when advertising organic products. The
simulation cites that 50% percentage of growth in the consumption of organics
is driven by the offering of organics at low-cost producers, like Big-Box Mart
– however, it is difficult to trace exactly how organic their products are due
to the complexity of their supply chains. By having federally regulated labels,
SmartMart would be able to maintain its core differentiator and in turn,
maintain their advantage.
How did you take into account the needs and
interests of shareholders and the other stakeholders of SmartMart?
Management, Environmentalists, Customers,
Suppliers and Communities were all considered in the decisions I made with
regards to the direction SmartMart should take to remain competitive. The
dynamic relationships SmartMart has which each of these stakeholders has a
significant impact on the viability of the firm in the long run. These
stakeholders see the value created by SmartMart and in turn are willing to pay
a higher exchange value then at low-cost competitors. To jeopardize any facets
of the value stream by attempting to become a big-box superstore will likely have
a negative impact on SmartMart in the long run.
Therefore I decided to suggest a
niche-grocer strategy for SmartMart, taking into account the needs and interest
of key stakeholders. Operating as a local grocer will not compromise
SmartMart’s business model, product quality, and can have an even more positive
environmental impact than what SmartMart demonstrates today. By moving in this
direction, SmartMart can meet increased demand for local produce and awareness
of the carbon footprint left behind by grocers. It will also mitigate risk of appearing
as though they are “green-washing” and allow for SmartMart to continue playing
up their strengths: offering the right product mix of local organic goods while
also being eco-friendly.
Overall, customers can continue to expect
to receive high quality products and customer service, shareholders will
appreciate this competitive differentiation strategy, local suppliers will have
the opportunity to have more of their product emphasized in this new concept,
and communities will appreciate SmartMart’s authenticity and commitment to what
the grocer stands for.
What is the difference between value creation
and value capture? What role did each play in your decision-making?
Value creation is the ability of an
organization to sell goods and/or services at a price that exceeds the cost.
Consumers reward companies for their value creation, as it aligns with a value
they care about and are willing to exchange money for the value created. Creating
value for stakeholders is the core proposition of a business in order to be
sustainable in the long-run. Firms must find competitive ways to create value
for its shareholders and key stakeholders, and this can be an ongoing dynamic
relationship as consumer trends evolve over time. Value capture can be a
consequence of value creation. Without value creation, it would be difficult to
capture or extract value. The amount of value realized by a firm, for instance
its profits, can be more significant in accordance with how much value a firm
can create. When looking at SmartMart’s long-term sustainability, value
creation is at the forefront. Once this value is created, it is then realized
For instance, SmartMart creates value in
its customer experience through its technology to offer the right product mix,
as well as its strong customer service. Consumers at SmartMart seek this value
created by the grocer and are willing to pay a higher price than at
Superstores. In turn, SmartMart is able to capture a higher exchange value.
Another example in how SmartMart is able to
capture more value as a result of its value creation is through its
relationships with labourers and suppliers. These strong relationships (value
creation) allows SmartMart to maintain lower-than-industry labour costs and
offer a wide variety of locally grown organic produce.
Both value creation and value capture
were equally considered in my decision making. SmartMart’s sustainability rests
upon its ability to continue creating value and in turn, value capture. Its
ability to command higher prices is reflective of its ability to meet consumer
needs while also being able to differentiate themselves with their technology,
human resources, and sensitivity to environmental concerns.
Which decision was the most difficult for you
to take and why?
The most difficult decision was deciding to
become a fully-customized store to a particular region
and competing closely with niche CSAs. This was also a key concern for
Management, as there is not enough information to guarantee that SmartMart is
able to customize to a specific community while being able to keep its
commitment to the environment, company mission and high product quality. SmartMart’s value creation is based upon
supporting these commitments to its shareholders and key stakeholders, and
customers are willing to pay a greater exchange value as a result.
It is not entirely clear whether the costs
of customization will outweigh its benefits for SmartMart, and if the company
will be able to sustain its margins. If the customization strategy jeopardizes
the quality of the service and products being offered, leaves a greater carbon
footprint or limits the possibility of expanding in the future, SmartMart risks
losing some of their core customer base to other niche players who can do a
better job of meeting local community needs.
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