Introduction
Trader Joe is a success story of a retail chain in the United States. The chain is named after its founder Coulombe Joe who is an MBA from Stanford University. Trader Joe had a humble beginning in 1967. The firm grew over the last fifty years and it had expanded to 414 stores by 2013. The objective of this paper is to define Trader Joe’s business-level strategy. It also discusses the trade-offs that allow Trader Joe to achieve competitive advantage.
Business-Level Strategy of Trader Joe
A business-level strategy is helps a firm in gaining competitive advantage over competition by exploiting their core strengths (Bass, n.pag.). Trader Joe’s business strategy is non-conventional that helps its shine out in the crowded retailing market segment. Trader Joe’s business strategy is to create value for its customer by doing four things: Knowing the customer, Integrating Low-cost and Differentiation Strategy and Effective Marketing.
Knowing the customer
Knowing the customer is central to a firm’s business-level strategy and Trader Joe knows its customers well. The retailer strives, on an on-going basis, to understand the needs of the customers and delight them by fulfilling those needs and expectations, be it in terms of cultural awareness, originality, reasonability or freshness. It also provides the experience of a traditional convenience store through its warm and friendly employees. The firm understands that freshness and originality are critical to get customers in this segment. Trader Joe also keeps updating and improvising its product assortment to serve as one-stop shop for its customers.
Integrating Low-Cost and Differentiation Strategy
Trader Joe has succeeded in integrating low-cost and differentiation strategy by offering customers quality products at a cheaper price. The firm has achieved this by backward integration that is creating private-labels for most of its products. These private labelled products are manufactured in-house. This integration in value chain helps the firm have control on quality of the product, innovate products to meet cultural needs and low-cost manufacturing.
Effective Marketing
The grass-root marketing strategy adopted by the firm helps it gain consumer loyalty and business growth. It is a quiet player in terms of marketing, but savvy in terms of techniques used like product placement, use of display boards, packaging, functional store layout and online marketing.
Trade-offs to Achieve Competitive Advantage
Trade-off is required to position oneself strategically vis-à-vis the competition. There are three main trade-offs that Trader Joe has to allow to gain competitive advantage.
First, Trader Joe has fewer choices in a product category and fewer brands. Consumers, sometimes, wish for a particular brand of peanut butter or a particular ice-cream, which Trader Joe does not offer. It keeps lesser stock-keeping units (SKUs) that most of its competitors. But, this pays off as consumers are happy with the quality of products and convenience provided by Trader Joe.
Second, Trader Joe has significantly higher employee cost. There is a trade-off that the firm makes in terms of its employee cost and employee effectiveness. The retailer keeps its employees happy so that they treat customers well and provide great in-store experience to them. In return, the firm has to pay a premium on employee cost.
Third, optimising the store size is one of the main trade-offs for Trader Joe. If stores are too big, it may not be financially viable and present everywhere. If stores are too small, it may not be able to cater to all consumer needs. To achieve competitive advantage, the firm has decided to keep the store small, but improve the floor space efficiency. This improves the stacking space and product visibility.
Conclusion
Trader Joe’s business level strategy is an integration of differentiation and low-cost strategy. Low-cost strategy, in itself, cannot provide an edge to the company as it merely means operational efficiency. The integrated strategy helps the firm succeed in the market. The firm allows trade-offs to achieve competitive advantage like limited product SKUs, higher employee cost and small size stores.
Works Cited
Bass, Brian. “Advantages & Disadvantages of Business-Level Strategy”. Smallbusiness.chron.com, 2017. 16. Jan. 2017
