Introduction
This report discusses the strategies that are used by Trader Joe’s. It discusses the problems that Trader Joe is facing related to strategies and how those problems can be solved. The following things will be discussed in detail that which strategies Trader Joe’s should use to improve its performance and to gain a competitive advantage. In short, this report is a strategic analysis of Trader Joe’s.
Company Background
Trader Joe’s was established by a person named “Coulombe.” After completing his education, Coulombe started working with a company. He worked some time with a company and after that quit the job to start his venture with the name of Trader Joe’s. He started his work only to facilitate the persons having a high qualification, but not able to get the jobs that they deserve. It mostly attracted the fresh talent, educated people who were in search of a job and it provided them a reasonable source of income that satisfied their needs.
The company had to increase the number of customers to expand in size. Therefore, to increase the number of customers purchasing its products, Trader Joe’s offered the products that were not offered by the competitors. He formed a loyal customer base by providing the competitive products at competitive rates. The customers became loyal with Trader Joe’s and became returning buyers. It gave the company the opportunity to introduce new products to the loyal customer base.
Strategic Analysis
The strategic analysis of any company involves the analysis of both its external as well as internal environment. To analyze the external factors, PEST analysis is done and to check the internal factors that affect the working of the company is SWOT analysis. In Strategic Analysis, the external factors are tested first and then the strategies are formed to test the internal factors.
External and Internal Analysis
The external strategic analysis of any company can be done by making its PEST analysis.
PEST Analysis
PEST stands for Political, economic, social and technological. Focusing on the political factors the decisions of different legal authorities like the Federal authorities affect the functioning of the company. On the other hand, the rules formed by the government related to advertisements and sales of products also affect the company. As Trade Joe’s focused on natural; labeling, so a lot of people criticized Trader Joe’s so in political factors Trader Joe’s also have to face those critics. The other political factors include the tax factors, environmental laws and labor force laws. But these things will not affect a lot the functioning of Trader Joe’s because the political system in the US is stable (Schlanger and Bhasin, 2013).
Economic factors also have a very major impact on the progress of any company because it will determine the financial position of that company. Trader Joe’s do not face a lot of problems from an economic point of view due to growth in the economy by 2.8 % and that in favorable inflation by 2.1%. In the coming days, the interest rate has the probability to increase and the value of the dollar will also increase. It made the US products more attractive as compared to the products imported from other countries (Lewis, 2005).
Social factors are the most important of all among all the other factors of PEST analysis. The social factors play an important role because it is working for the benefit of the newly educated group. It is also focusing on increasing the education level and improving their living standards. The most common social trends that are increasing the number of migrations among urban people are the pursuit of the improved lifestyle and bridging the income gap (Robinson, 2000).
Technological factors also have an impact on the working of any company. When the technological factors are looked upon Trader Joe’s, follow the traditions in this thing. It does not use the modern technology as used by other stores like Wal-Mart. It does not have online websites and online social pages. It provides an edge to their competitors who use modern technology.
SWOT Analysis
SWOT analysis is used for internal analysis of any company. It includes the analysis of the threats, weaknesses, opportunities and strengths of any company.
Strengths are the factors that the company has to gain the competitive advantage. The strengths of Trader Joe’s are (Palmeri, 2008)
They have a brand name and brand name plays a very important role in the success of any company even if the brand name is not very famous. It increases the number of customers, and they become loyal to the brand name, and this benefits the company. The brand name is considered a positive thing.
The strength of Trader Joe’s is that it has a very good supply chain network. The goods are distributed directed to the suppliers, not the wholesalers. This strength is to some extent because of the Aldi Corporation. It does not use technology for the purpose of promotion, but it uses modern technology order to improve its supply chain network because of the help of Kaizen. It improves a lot its supply chain network and thus it can easily distribute the products to consumers.
Trader Joe’s offer products that are different from the market so this provides a benefit to them as it can easily charge high prices for its products because they are rare.
Strength is due to its brand name i.e. of having loyal customers.
With all of the above strength another strength arises, that is the more share of branded products which leads to customer satisfaction and more profit.
Weaknesses are the factors in which the company lags behind and needs some improvement in those areas. Some of the weaknesses of Trader Joe’s are
One of the major weaknesses is the effect on the brand name of Trader Joe’s that resulted because it treated some of its major customers unreasonably. It gave rise to the bad worth of mouth, and that has a bad impact on the brand name.
Another weakness of Trader Joe’s is the parking problems that it face in the areas where the area of the store is small and due to overcrowding on weekends people talk about the problem of parking. The company has not formed any strategies to cope with these problems.
The problem of not moving the company to more and more geographical areas is another weakness of this company.
The company also does not have a collection of products and the group as other companies have.
Opportunities are the factors that the company have and can befit from them in present as well as in future. Some of the opportunities of Trader Joe’s are
It can expand its business in different geographical areas which will expand its market and will lead it towards profit.
The demand for organic food is increasing day by day. It is also another opportunity for Trader Joe’s.
Trader Joe’s also have the opportunity that it is retailer store and the demand and sales of its product will increase day by day.
The threats are the external factors from which the company has some danger and will affect the working of company badly. Some of the treats are
The increasing trend to shop online in the minds of customers is a threat for Trader Joe’s as this will affect its sales.
The increase in the labor cost will also be a threat
The increase in online stores is also another threat.
Porter Five Forces Framework
It is another tool that plays an important part in the strategic analysis. It is a very strong power in the hands of suppliers, but this is not in the favor of the manufacturers. That power is the power of bargaining. Trader Joe’s has taken some steps to decrease the power in their hands, and that can be done by providing them with a good price setup.
This power can also be decreased by loyalty. If the company offers different products and that are also in the range of the customers then that products will attract the customers and will decrease the power of customers. It also reduces the threat of competitors when the company offers the products that are different from other retailers. The study and survey show that in order to start and to run a good business there is need of good technology, large capital, a strong network of distribution, powerful brand name. To some extent the danger of Rivalry has reduced because of the implementation of policies by government. It shows that while using the Porter framework, the technique of differentiation is used. However, on the other hand, the hybrid technique is used in Bowman Strategy Clock in which the company offers the products of high quality to its customers even at low prices (Karray and Zaccour, 2007).
Blue Ocean Strategy
This mode says that one of the most effective ways of attracting the customers is by providing them value rather than using the techniques such as differentiation and positioning. If the customers are provided with good atmosphere, friendly ad different products then it will attract the customers. It can be done by using the model of Strategic Canvas (Karray and Zaccour, 2007).
Internal and External Factors Analysis
The analysis of the effects of the internal and external factors can be done by internal factor analysis and external factor analysis of the company. In this analysis scores are assigned to each factor that how much each factor weight and then it is noticed that how much the company benefits from its opportunities and strengths and which measures the company takes to reduce its threats and weaknesses.
Internal factor analysis
(Lisinki & Sruckij, 2006)
The score of strengths of the company is more as compared to weaknesses.
External Factor Analysis
(Lisinki & Sruckij, 2006)
Strategic Factor Analysis
In strategic factor analysis, the company uses both the data from the internal factor analysis and external factor analysis and then uses them
So this analysis shows that in addition to improving the markets at the national level the business on the international level should also be promoted. It will lead to an increase in the market share and many other factors and will take the company towards success.
Problems faced by Trader Joe’s
Trader Joe’s is increasing its market share and improving its performance, but besides this, it is also facing many problems which are
Promotion Problems
One of the major problems that Trader Joe’s is facing id that of not having any official websites or any strong social media network which will provide its customers of the latest updates regarding them. Trader Joe’s has only one website which is official. On the other hand as compared to the competitors it does not have any pages of Facebook or any other such social media applications which are dragging it behind from its competitors. In this modern worlds, the most important and easy source of communication with the customers is by the use of social media because now almost about 95% population of the world is using social media. So if social media adds are given, then this will attract the customers more towards them and from even those areas where it don’t have its stores or headquarters (Lewis, 2005).
Parking Problem
Another major problem that Trader Joe’s is facing is that of the parking problem. When there in more crowd on weekends the people have to park their cars and there in not enough area for parking because the stores of Trade Joe’s are made in very small areas. In any of the countries, its stores do not occupy the very big area, so this thing creates restlessness for the customers when they do not find a sense of security. They will not do shopping in a relaxed mode as they will be facing the tension of their vehicles. So this is a factor that will affect its sales to a very large amount and will take it towards a downfall (Senauer and Seltzer, 2010).
Recommendations
Trader Joe’s has to solve the problems that it is facing because these problems are an obstacle in the path of its success, and they need to be solved urgently.
Improving Promotion Techniques
Trader Joe’s should improve its promotion techniques by giving its advertisements in an effective way. If the message is communicated to the customers in a very good way, then a number of customers will buy the product. So it should use social media for this purpose. It should make pages on Facebook as well as it has to maintain its official page so that people can get information about the company whenever they want to. It will make their customers loyal to them (Kowitt, 2010).
Promoting Online Business techniques
Trader Joe’s should take another addition to its business that will be the start of an online business. Trader Joe’s should make official websites. Besides, it should also introduce an application in the mobile phones. By using that application the people can buy its products easily. For this, it also has to enhance more its distribution system. It will also save the cost of installing new stores in different areas and will bring the customers from those areas, even where they do not have started their business (Sheets, 2014).
Area Problem
Trader Joe’s should also focus on solving its area problem. For that purpose, it has to take a large area and then establish its stores there. It will also solve the problem of parking for people and will reduce the restlessness that the people face because of insecurity. It will increase their sales on weekends as they will not be affected by parking issues of the company (Senauer and Seltzer, 2010).
Future of Trader Joe’s
The reviews and the study show that Trader Joe’s is progressing day by day, and if it keeps on going with the same speed, then it will gain a lot of success in a very short period. There are very few problems that Trader Joe’s is facing in its business, and those problems can be solved by making a little bit struggles in future. A magazine showed that when a girl came to know of the arrival of Trader Joe’s in their city, then she became very excited and happy on that as this thing attracted her a lot that now she can get the desired products just nearby her house.
Trader Joe’s has a very good brand name and a broad range of the loyal customers. The number of customers will further increase more if this company manages some more its brand name then this will lead to its success. The analysis of the factors of Trader Joe’s also showed that it benefits a lot from its opportunities and has developed the ways with which it can easily deal with the problems it is facing so it will lead its competitors in future if it will keep on struggling (Shermon, 2013).
The problems of areas and that of public relations that Trader Joe’s is facing are also not so big and can be solved easily and when those problems are solved then alt these things will add up to the market share of Trader Joe, and it will become better. The advantage of selling rare and unique goods is benefiting Trader Joe’s a lot so it should try to introduce new products and add them to its market so that it can grab a number of the customer then.
Conclusion
The above report of Trader Joe’s showed that there are some strategic problems that Trader Joe’s is facing, but they can be solved by implementing new strategies for the success of the company. The report shows the internal, external and strategic factor analysis, which shows that Trader Joe’s is overcoming its weaknesses day by day. The other strategic model shows that both the internal and external factors are of major importance in the functioning of the company and need to be evaluated for the betterment of the company in future. It will take the company to heights of success
References
Karray, S., & Zaccour, G. (2007). Effectiveness of coop advertising programs in competitive distribution channels. International Game Theory Review, 9(02), 151-167.
Kowitt, B. (2010). Inside the secret world of Trader Joe’s. CNN Money.
Lewis, L. (2005). The Trader Joe's adventure: turning a unique approach to business into a retail and cultural phenomenon. Kaplan Publishing.
Lisiński, M., & Šaruckij, M. (2006). Principles of the application of strategic planning methods. Journal of Business Economics and Management, 7(2), 37-43.
Palmeri C., (2008). Trader Joe's Recipe for Success, Retrieved from http://www.bloomberg.com/bw/stories/2008-02-20/trader-joes-recipe-for-success
Robinson, R. B. (2000). Strategic management: Formulation, implementation, and control. Irwin/McGraw-Hill.
Schlanger D. and Bhasin K., (2013). 16 Brands That Have Fanatical Cult Followings, Retrieved from http://www.businessinsider.com/cult-brands-2012-6?op=1
Senauer, B., & Seltzer, J. (2010). The changing face of food retailing. Choices, 25(4).
Sheets C.A., (2014). Whole Foods, Trader Joe's Lawsuits At Center Of 'All Natural' Labeling Debate, Retrieved from http://www.ibtimes.com/whole-foods-trader-joes-lawsuits-center-all-natural-labeling-debate-1629408
Sherman E., (2013). How High-Tech Is Changing Retail, Retrieved from http://www.inc.com/erik-sherman/successful-retailers-use-technology-to-boost-sale-and-margins.html
