number+3+External+Analysis

Industry analysis - #3 External Analysis

Grocery Stores. Key Industry Trends – External Analysis 1. Technological trends/changes - Mostly changes in digital information - Comps, Internet, cell phones - Some completely new additions in technology – TiVo

Opps – how to create new tech’s Threats – firms forced to rethink tech strategy

Relevance ? Self-checkout machines in grocery stores Opps – Save on costs. ( cutting back on physical labor ) Threats- Will consumers follow trend or be discouraged from going to stores with majority self-checkout line? Are the consumers tech friendly?

Opps- Scanning inventory/products etc ? expedited/efficient due to improved technology? Savings in this area? Threats – at-home delivery ( online purchase/delivery companies )

The external environment is constantly undergoing technological changes. We are living in a digital age, where updates and modifications are constantly being made to the newest, fastest items. Increasing reliance on technology has led to effects on the labor market, because people are being replaced by machines. These changes can provide opportunities for the grocery store industry in a few ways. One of the first obvious opportunities is the ability to cut back on costs, by replacing physical labor with electronic checkout machines. Another opportunity, would be to use improved technology in the supply chain to expedite the process through the different channels. Storage procedures may for instance be made a lot more efficient, which would save on costs as well. Another opportunity, would be for those within the industry, to find their niche and something that can be improved upon with better technology, and be the first to employ it. For instance, what super market was the first to use self-checkout machines? Now, everyone is using it. Possible threats may be present when targeting a "niche", because sometimes customers may not be keen to adapt. For instance, customers may not be interested in using self-checkout machines and may prefer interacting with a person at the checkout aisle instead. Research would have to be done to measure the prospected revenue from this aspect. If the digital wave continues to penetrate the grocery store industry, then the option of "at-home" delivery may become more common and popular. This could be a threat for grocery stores that aren't quick to include this as an offering, while others are taking full advantage. The popularity of this offering is largely affected by the continually changing family structures.

2. Demographics Age/Sex/Marital Status/Income/Ethnicity

- Baby boomers, more disposable income - Hispanic population – rapidly increasing/growing -heavily cultured, so ethnic food purchase will be rising -buying power of this population, also on the rise

Opps – Spanish products/foods/ads

“ Firms can exploit their understanding of a particular demographic segment of the population to create a competitive advantage”

Understanding the demographic segment is a critical element to understanding the environment of the market being entered. Who has buying power? What changes in buying power and average household incomes are there? Baby boomers are heavily discussed when this topic comes up, because of their high disposable income. So what are they buying, and how are they buying it is the next question. Speculations have been made about the ever-growing Hispanic population and its effects on different markets. For instance, because this is a market that is very rich in culture, considerations would need to be made to meet needs that would arise from that. An example would be the rising purchases of ethnic foods and ingredients. The buying power of this vastly growing and expanding market is also notable. After doing research in this area, a firm would then find it advantageous to tap into these needs by increasing their presence and awareness in the Hispanic communities through Hispanic products,foods and advertisements. Training their employees on the culture and hiring Spanish-speaking personnel would also increase their competitive advantage.

3. Culture - What’s “IN” and/or acceptable Opps – eating healthy, recycling, “Go Green”, organic foods, - Energy drinks, cereal diets, on the go breakfast, smaller portions

Threats- possible threat may be consumers preferring “naturally grown” products and diverting their business to farmers markets etc

Understanding the culture of the segment is also of very high value. The culture defines what the people like, are doing, what triggers them and motivates them. Understanding these factors would be critical to make sure we're heading int he direction direction.Our society is currently obsessed with eating healthy, recycling, "Go Green", energy drinks, cereal diets, on the go breakfast, and organic foods. These would a lot of value if understood and utilized correctly.

4. Economic Climate/Trends -Recession vs depression vs business cycle -currently: recession -effects on product pricing, so..effects on supply chain -buying patterns of consumers effected -commodity items/necessities - If cutting back on supply chain costs is an option, then can be seen as an opportunity. If not, then becomes a threat -imported items? Rising interest rates

The economic climate/trends is also a critical element to factor in when analyzing an industry's external environment. Whether the industry is operating within a recession, depression affects the pricing, buying patterns of consumers, reliance levels on commodity items etc. Rising interest rates as a result of a poor economic state are also elements that effect other facts, so must be carefully and thoroughly analyzed.

5. Legal/Political conditions -govt regulation = HIGH -limits on production

Govt regulation exists in almost every industry that can be thought of. In the food industry, the govt puts regulation and on products.From some very small aspects of production to largee ones.

6. Special/Intl events -war, increased govt spending on arms and not as much into food programs? -9/11 ?

Special inl evnts are perhaps not as common but thought you i hav