SmartMart: Case Study Analysis For Organic Food Market

SmartMart’s Strategy for Rapid Growth

Questions :

1. Describe the strategic and ethical choices specific to Smart Mart.

2. Engage issues under conditions of strategy implementation and evaluation.

3. Apply relevant tools and techniques of strategic analysis for Smart Mart.

4. Apply principles of decision-making under conditions of uncertainty.

5. Justify or substantiate strategic choices, decisions, or intent.

6. Recommend a course of action for Smart Mart.

Based on the case study and simulation data, it can be clearly understood that SmartMart has grown rapidly over last few years, and has created its own position in the segment of organic food market. Its rapid growth is reflected by stores which are more than thousand spread across various countries, along with numerous partners, and suppliers to support the business. Low cost of brand merchandise has enabled SmartMart in a major way, as it has become its one of the major strengths further strengthening its rebate based retailing strategy (Alstete, 2013, pp.110-111).  However, one must not misunderstand this strategy as the core focus of SmartMart, as SmartMart’s strategy is more than selling on low cost. One of the key strategy decisions to setup stores near to distribution facility has enabled SmartMart to control its operational cost low, and always maintain the stock at an optimum level.  

The core idea behind the entire distribution system of SmartMart is based on the concept of tight control over supply chain for the stores. Due, to location of distribution centers in vicinity (around a day’s drive) has ensured that there is always a quick circulation and replication of the stock, and always has an optimum stock level in the stores (Aras, G., & Crowther, 2012). It is important to understand that tight integration of entire distribution network with the stores, has ensured rapid growth of SmartMart as brand, however its focus on stock administration has also helped the brand to grow rapidly, and enabled it to have an efficient store planning in terms of space utilization to an efficient level.

One important aspect of SmartMart’s strategy implementation is the focus on reduction in store level speculations and assumptions, and further focus on e-business, despite of the stagnating sales and drop in the store movement across locations in United States (Brandenburger & Vinokurova, 2012, pp.286-287). This is clearly reflected by the fact that recently organization trimmed down its expected growth rate from 5% to 3% which indicates the drop in future evaluation of the company. However, CEO of the organization has maintained its stand on the fact that in a situation if there is change in the market environment, then his organization is flexible enough to adapt its business strategy to handle that change. Apart from its specific focus on boosting sales through online channel, SmartMart has also identified certain stores where certain improvements are needed, important to note is that these stores are the one which have reported flat sales over consecutive six quarters. In order to improve sales in such stores, following are the strategies:

SmartMart’s Distribution System

Customer experience is an important aspect which can make or break a business organization. In this regard, based on case study of SmartMart it can clearly seen that long checkout lines is one major factor which might impact the overall customer experience. In order to address such issue, SmartMart store management need to open more checkout lines, especially during peak festive seasons such Christmas (Erickson et al, 2012). Additionally SmartMart can also focus on boosting its human resource level, so that additional people can be used to quicken up the services offered to customers, and also it wants to evaluate response these associate give to customer through innovate programs such as ‘Mystery customer’ program.

Application called Saving Catcher is an innovation from SmartMart, through which it has empowered its customers to compare and contrast the price of various products, and amount of money they will be able to save on each shopping trip. In a way, it has enabled SmartMart to offer discounts indirectly to its customers, which customers have appreciated over a period of time. This strategy has enabled SmartMart to compete with its competitors on the basis of pricing strategy (Iacob et al, 2012).

SmartMart is an organic food retailer, with its focus on organic food items being the main differentiator. According to case study and CEO of SmartMart it is clearly mentioned, that SmartMart has always maintained its focus on not only achieving profitability, but also ensuring that it contributes to health environment. One major unique selling proposition for SmartMart is its brand value, and support from stakeholders. Major part of the customer base is formed by the customers who are from affluent part of the society, since pricing of organic food is relatively higher than the normal food items (Computing Conference, 2012). Three core aspects of SmartArt strategy are follows:

• Focus on creating value for its stakeholders
• Amplification of the value for the customers and stakeholders
• Porter’s five force model for stakeholder investigation

These aspects are in alignment with the values, mission and objectives of SmartMart as an organization (Ireland et al, 2011).

SWOT Analysis: SWOT analysis is a tool for strategic analysis which helps in identifying, strength, weakness, opportunity and threat for the organisation being analysed (Peters, 2013).

In case of SmartMart following is its SWOT analysis

Strength Uniqueness of organic food products in market. Strong brand value in the market Loyal customer base (Laszlo & Zhexembayeva, 2011).	Weakness Relatively, high cost of the food products compared to non-organic food items. Lack of marketing efforts Lack of new stores in key locations
Opportunity Increasing awareness about organic food products has provided ample opportunity for SmartMart to market and push its product to larger customer base. High level of adulteration has forced people towards organic foods. Focus on new avenues such as bio-fuels etc.	Threat Currently, threat from any alternative brand is relatively less. High cost of product, impacts the overall profit margin of the product. Rising rentals of stores might increase the overall operational cost of the products.

Based on the above SWOT analysis it can be understood, that SmartMart has clear advantage in the market of organic food, and considering the fact that SmartMart is further focusing on diversification in different markets such as bio-fuels etc. it definitely has a positive future ahead (Brandenburger & Vinokurova, 2012). However, it is also important to understand that SmartMart should also maintain its focus on consolidation of its leadership position in the market of organic food; this will ensure that any potential new competitor finds competing with SmartMart extremely difficult (Iacob et al, 2012).

Based on Porter’s five market force model, it can be said for SmartMart that it has medium threat from suppliers, as they do not have much options in terms of a procurer who might procure their organic food products (Johnson et al, 2011). Similarly, from buyers/customers also SmartMart has medium threat mainly due to the fact that there are hardly any organic food retailers who specialises in this segment, hence buyers/customer do not have much choice. However, SmartMart does have high threat from new entrants and substitute products. With rise in awareness about organic food, people are now willing to spend extra amount of money on getting organic food item, that is why, there are many small and big food retailers who might be interested or are already in the process of setting up organic food retail chain (Laszlo et al, 2011). That is why, over a period of time, SmartMart will definitely have substantial amount of competitor. In order to tackle this potential situation, SmartMart should focus on cementing its position as leader in the organic food market to a level, where any new entrant in the market finds it extremely difficult to challenge the dominance of the organisation.

Improving Customer Experience in SmartMart

On paper, opening new stores for SmartMart might appear to be a lucrative and justified strategy. However in current situation of the organization, management of SmartMart should focus more on consolidating its existing market position and improving the overall store productivity and efficiency. New stores opened without control on current stores will only result into additional capital expenditure for the organization which is not a good strategy. In order to improve the productivity, SmartMart operations team can focus on store renovation, and scaling most profitable stores from level of store to superstore (Lei & Slocum, 2013). This will enable SmartMart to offer wide variety of products apart from its core organic food products, which will enable to attract more customers for its business. Increasing the range of items offered to customers will improve customer footfall in stores, and will further boost the profitability of the store.

Merger and acquisition is an important alternative strategy which SmartMart can opt for. SmartMart can identify stores which are in similar line of business and can be acquired (Peters, 2013).  This will ensure that SmartMart captures further market share without investing much capital to setup new stores. Acquisition strategy will enable the organization to strengthen its market position and will boost its reach various parts of country where it is yet to reach (Nguyen & Schultz, 2013).

It is already anticipated by management of SmartMart that future will be bright for the retailers who will be able to trim down their operational cost. In this regard size of store will matter a lot. That is why; focus of SmartMart should be towards setting up compact stores which will acquire less space, without trimming down its offering to end customers. SmartMart also needs to further extend its reach in urban regions to capture more market share, and to cater to new customer base which is inclined towards organic food items (Pelham & Lieb, 2011).

SmartMart needs to make the optimum use of technology in order to boost its business. It needs to prepare proper strategy for handling its marketing on social media applications such as Facebook, Twitter etc. This will enable that its e-business strategy will get a boost due to its sustained focus on the online marketing strategy (Ritchie et al, 2012).

One important decision making theory which can be applied is Expected Utility Theory. This theory mainly clarifies that how people’s preferences with regard to choices that have uncertain outcomes (Schrader et al, 2012). Thus as per this hypothesis, it can be said that the director of the company opts for an unconventional or risky choice with a goal of boosting the normal utility of benefit. However, supervisor might not be able to capture the thought process or intention of the director which might result into poor or minimal efforts from the supervisor. In an uncertain market environment, where every day new competitors might be coming up, it becomes important for the Director of the company to foresee various circumstances, which might impact the growth of SmartMart in future. In this endeavour, there might be several decision making instances which will be done in an uncertain environment. However it is important to understand that these decisions might be a calculated risk, but they need to be taken based on the past data, record, market performance and other relevant aspects of the business.

There are multiple reasons due to which initial strategies of SmartMart failed. Some of the key factors are:

• Poor evaluation of performance and ignoring the learning in further improve the business.
• Lack of focus from management towards the core aspect of the business. However in case of SmartMart there have been several distractions for the owners in form of focus on bio-fuels etc.
• Implementation of the strategy in operational sense, rather than making the strategy and not implementing it.
• Hiring right individual for right job in the organization with relevant experience in the field of retailing.

7.0 Conclusion

Overall it can be said, that SmartMart exists in niche segment of organic foods-a segment which is yet to achieve is complete potential. In such situation, it becomes SmartMart to be well-prepared for upcoming future opportunities (Verbeke, 2013). In order to extract the benefits of the future market growth, SmartMart needs to focus on identifying and implementing correct market strategy.  It can be achieved by ensuring that SmartMart clearly analyses its current market scenario and based on that it takes relevant decisions related to changes in its existing business strategies.

References

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